What the Plus is going on with the real estate market!?

How Plus helps us understand what’s going on with the latest developments in the U.S. real estate market.

💡 One of the many ways we use Plus is combining information from different sources to create up-to-date dashboards for anything, from building Plus all the way to monitoring current events. Look out for occasional posts, nicknamed “What the Plus!?” in which we’ll share what we’re keeping an eye on in the broader world, and how Plus helps us do so.


Among the many knock-on effects of the COVID-19 pandemic has been a rollercoaster ride in the real estate market, with millions of Americans moving, renovating, or window shopping for new homes (SNL even got in on the action!). Here at Plus we’ve been interested as well, and Plus has helped us keep a pulse on the latest twists and turns.

TL;DR: Keep an eye on inflation, mortgage interest rates, sales volumes, home prices and sentiment — all with Plus! Take a look for yourself!


Here’s a more-detailed deep-dive on what’s happened, where the market is now, and where we might be headed…always up-to-date with the latest data, thanks to Plus!

Let’s start by building the foundation

The U.S. residential real estate market may be large and complex, but at its core it behaves like any other: the laws of supply and demand shape both home values (prices) and the volume of sales (quantity).

And, to make things even simpler, the supply of homes in the U.S. is (relatively) fixed, both because it takes a while to build houses (especially as of late), and we simply haven’t built enough of them in the last 15 years (since there’s a huge construction deficit dating back to the aftermath of the 2008 mortgage crisis).

As a result, fewer than 1 in 10 homes sold are new homes.

So really it’s a story of demand, and that is largely a story of how much house Americans can afford to buy. Since most homeowners need to take out a sizable loan to buy a home, affordability is driven by mortgage interest rates…so strap in for a brief exploration of mortgages rates, the Fed, and (lately) inflation.

2020 and 2021: A red hot real estate market, fueled by historically low interest rates (and significant movement of people and families) in response to COVID-19

To understand how we got here, we have to go back to late-2018, when mortgage interest rates began a sustained decline. Rates eventually fell by nearly half from their late-2018 peak, reaching all-time lows of ~2.65% on a 30-year fixed rate mortgage in January 2021…

…Thanks to the Federal Reserve abruptly lowering its benchmark rate (and keeping it at effectively 0% through much of 2020 and all of 2021) to stimulate the U.S. economy in response to COVID.

This triggered 2 immediate changes in behavior for existing and prospective homeowners in the first half of 2020: First, homeowners rushed to refinance their mortgages, looking to lock in lower interest rates, reduce their monthly payments, and (in some cases) tap into the increased equity in their homes…

…And second, home buyers immediately emerged from COVID-19 lockdowns to take advantage of increased affordability of mortgages, doubling the rate of pending sales from their early-COVID pause (and ultimately reaching the levels seen leading up to the 2008 mortgage crisis.

And, with the supply of homes relatively fixed, this surge in demand put sellers in the driver’s seat when it came to pricing…

…Powering some of the fastest ever home price increases, from an average of ~$300K immediately before COVID to nearly $425K by mid-2022:

So, to summarize: interest rates went down, enabling (all else being equal) more people to buy more house for the same monthly payment, which — without more housing to absorb and offset this increased demand — drove up prices.

So…where does that leave us now, midway through 2022?

2022: It’s not you, it’s I(nflation) (and it’s not done yet)

As the U.S. economy rebounded from its COVID contraction and absorbed the impact of Federal stimulus (including those low interest rates!), inflation started to accelerate in the second half of 2021…

…which the Fed ultimately recognized (probably too slowly) in the 4th quarter of 2021, when they started talking about raising their benchmark interest rate in 2022…

…Following through in February and several times since…

…Immediately driving up the yield on 10-Year Treasuries (the bonds that are most directly linked to mortgages):

This increase in interest rates sent all types of mortgage rates dramatically higher (more than doubling the rate on a 15-year fixed rate mortgage from mid-2021 to mid-2022, for example):

This sudden increase in borrowing costs would be impactful enough on its own, but was compounded by the rapid demand-driven increase in home prices we already described. Let’s do some rough math (assuming 20% down payments):

The interest on a monthly mortgage payment for an average home more than doubled between June 2021 and June 2022 — yikes! This has created a huge affordability problem…

…Which we’re now seeing reflected in housing demand, with declining sales volume…

…And increasing active listings (which follow a sine wave-like pattern throughout the year, so are up significantly vs. the period 12 months prior)…

…and the requisite headlines highlighting both dynamics:

Where to go from here?

If there’s one thing the last few years have taught us, it’s that predictions are notoriously unpredictive. But let’s give it a shot…and at the very least we can keep our eyes on the right metrics!

The good news: We’re not likely to see a repeat of the 2008 mortgage crisis, where average home prices fell by 25%+. To overly simplify, that decline in home values was triggered by a combination of excess building leading up to the crisis, and then foreclosures on risky mortgages that triggered an expansion of homes available for sale during the crisis.

As we’ve already established, too few houses have been built over the last 15 years, keeping housing supply tight. And because mortgage debt costs remain historically low…

…And mortgage delinquency rates are in line with their long-term averages (and far below the mortgage crisis)…

…There is unlikely to be a sudden glut of houses for sale due to homeowners defaulting on their mortgages. And, in fact, people who might otherwise have considered selling their homes — conditioned by the last few years to expect significantly higher home values, and now priced out of the next home they were hoping to buy thanks to rising prices and borrowing costs — may opt to hold onto their homes longer, reducing the supply of available homes even more. (Also, higher borrowing costs also make it harder for builders to build homes, further contracting housing supply…but, since new homes are only a fraction of total home sales, this is probably a marginal impact at most).

The not-so-good news: It seems we’re headed for a breather where the volume of homes sold falls significantly, and remains low for at least the next few quarters. This will take some pressure off of rising prices (and, perhaps in some markets, lead to price declines), but will also mean leaner times for the hundreds of thousands of Americans who make money when homes change hands: realtors, mortgage lenders, real estate attorneys, and the like.

Let’s watch these charts going forward to see how it all plays out!


💬 If you have an idea for a “What the Plus?!” dashboard, DM me on LinkedIn. And if you’d like to see how Plus brings together all of your team's data where you need it, without having to worry about complicated setup or integrations, request an invite to join our Private Beta — we’d love to hear your feedback!

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