The Current State of the Housing Market

A number of trends that existed prior to the pandemic have been accelerated. Home prices have increased at an astonishing rate over the past year and show no signs of abating. Even worse for those looking for homes, every market is hot, both here in the U.S. and overseas. The factors that underscore the increases are numerous, but central banks around the world have taken notice. 

Data from the National Association of Realtors indicates that the median price of a home eclipsed $350,000 for the first time ever and was up almost 24 percent year-over-year during the second quarter. Phoenix, San Diego, and Seattle saw the highest increases, but most cities across the U.S. are experiencing home price growth that has confounded many.1 This is also becoming a problem around the globe, as home prices in Sweden, Denmark, and Russia accelerated even faster than prices in the U.S. No matter the country, many homes are selling in a very short amount of time and above asking price, making it difficult for first time home buyers. In some of the higher demand areas, cash offers and waived inspections are often required to win the bidding war. Inflation in the price of materials has further exacerbated the situation, with lumber prices driving prices up even more.

Demand for homes has been driven by a number of factors. Prior to the pandemic, there was already a shortage of homes and simultaneous growth in demand. Combined with extremely low mortgage rates and an exodus to the suburbs as the pandemic played out, homes have been even harder to come by. When states across the U.S. went into lockdown, those at the lower end of the earning spectrum were hit hardest, as service sector workers were unable to work. At the same time, those that could work saw an increase in their wealth due to less spending overall. According to a report by Credit Suisse, aggregate global wealth by households increased by over $28 trillion.

The irrational exuberance has not gone unnoticed by the Federal Reserve, as boom and bust cycles in the housing market generally hurt the overall economy. Currently, the Fed is purchasing $40 billion per month in mortgage-backed securities and $80 billion in treasury debt.3 A number of Fed officials have begun to call for the scaling back of these programs as housing markets are taking off. Robert Kaplan, president of the Dallas Fed, has called for an end to these purchases “sooner rather than later.”3 The Fed has stated that they will reduce their asset purchases once the economy is closer to its 2 percent inflation target and full employment. Projections from the Fed have also shown an increase in interest rates on the horizon which could help to curtail some of the high demand.3 Recently, there has been a glimmer of hope. Supply of new homes for sale in May jumped to 330,000, a 5.8 percent year-over-year increase. Overall, the situation remains tenuous. Matthew Speakman, an economist at Zillow, indicated that the US housing market remains far away from being balanced.1 

Concerns in the housing market across the globe remain. Trends that were in place before the pandemic have been exacerbated and made it more difficult for those looking to buy homes. Central banks continue to monitor their policies and the possible creation of a housing bubble, as global economies become inextricably tied to housing markets. Time will tell if another bubble is forming, but there is no doubt that the pandemic has created tumult in the housing around the world.


1. Mamta Badkar, “U.S. home prices rise at fastest pace in more than 30 years,” Financial Times, June 29, 2021, 

2. Delphine Strauss and Colby Smith, “Runaway house prices: the ‘winners and losers’ from the pandemic,” Financial Times, June 25, 2021, 

3. James Politi and Colby Smith, “U.S. cannot afford housing market ‘boom and bust’, warns Fed official,” Financial Times, June 27, 2021,

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