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February 24, 2022 | Inflation and Growth in Home Prices at 40-Year Highs

Robert Campbell

Robert Campbell is a real estate analyst and economist. He's been publishing The Campbell Real Estate Timing Letter since 2002. His book (Timing the Real Estate Market) presents a clearly defined method for predicting the peaks and valleys of real estate cycles.


U.S. inflation soared to 7.5% in January – a 40-year high.  (Source:  BLS)

U.S. home prices soared 18.5% year-over-year in December – an all-time high.  (Source: CoreLogic)

Because housing prices are currently appreciating faster than the rate of inflation – 18.5% vs 7.5% – homes are still a good place for investment capital.

Mortgage Rates Are Rising Too

Due to rising levels of inflation, interest rates have been ratcheting higher since January 2022.   Because of that, mortgage rates spiked to 4.02% on Feb 11th according to Mortgage News Daily – a two-year high.

That’s a problem, right?

Probably, but not yet.

The Mortgage Bankers Association’s (MBA) recently reported that average loan sizes reached a record high ($446,000) during the week ending February 4.  That was the fourth consecutive weekly record high in a row. 

The Inventory of Homes for Sale Continues to Fall

In the last week in January, we set another new record low in available inventory of unsold homes on the market.  There were just 272,000 single family homes for sale in the entire country.  (Source:  Altos Research)

This suggests that home prices have not risen fast enough to balance supply and demand – and even rising mortgage rates have not yet discouraged eager home buyers.

Buyers will complain about the price of a product until that product is in short supply.  Then they will pay any price that is required to get it.

Market Risks

If home sales start declining due to rising mortgage rates, watching the inventory of homes for sale will be key.   When the pandemic is officially declared “over,” people could quickly become less afraid to let potential buyers walk through their homes – and be more willing to put their homes on the market.

We haven’t seen increased inventory hit the market yet – nor a significant downturn in home sales – so it’s likely that this bull market in housing still has a ways to run before peak prices are reached.

But when housing prices do eventually approach a market peak, there will be ample warning – and visible signs – to help us see it coming.

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