House prices have risen nationally 15 percent in the past year, raising concerns about the stability of the housing market. A combination of high demand and low supply, caused by low interest rates and pandemic-related migration among other factors, have driven this increase, writes AAF’s Director of Financial Services Policy Thomas Wade in an analysis of the current state of the housing market. This market is trending toward normal, Wade notes, but challenges remain. 

Wade concludes: 

Many of the exceptional data points seen over the last two years under the coronavirus pandemic are beginning to return to normal. Mortgage rates are predicted to rise, decreasing both the financial incentive to buy and consumer demand. Total home inventory is expected to rise, allowing supply to come closer to demand. The direction of monthly housing data results appear to be toward normal, although demand and supply are likely to be adversely impacted by the end of federal aid programs. Lumber and other material prices may continue to rise in the background of increasing inflation. Even outside of the economics of the pandemic, however, it seems likely that demand will continue to outpace supply, particularly as Americans continue to reassess what they need from their living spaces. High demand, a growing housing inequality, and an increasing class of millennials unable to become homeowners suggest that even though the unique stresses of the pandemic may have been weathered, policy challenges will remain even as the United States returns to a post-pandemic normal.

Read the analysis