Many believe it started with a global pandemic. With Americans shuttered in their homes, working remotely, exercising in kitchens and dining rooms, and facing unimaginably low mortgage rates, the nation’s single-family housing market boomed. But the nation’s housing market had momentum coming into the pandemic. According to Case-Shiller National Home Price Index, from the bottom of the previous correction in February 2012 to the peak of the pandemic housing boom in June 2022, home prices rose on a month-over-month basis for 124 consecutive months.

Indeed, the broader U.S. economy rallied after being undone by the early stages of the pandemic. By 2021’s second quarter, U.S. output as measured by gross domestic product was above its pre-pandemic level. At the heart of America’s v-shaped recovery was a combination of fiscal stimulus, accommodative monetary policy, and vaccinations. Household savings surged during the pandemic due to a combination of stimulus payments, rapid recovery in labor markets, and foregone consumption (e.g., postponed vacations). As the economy reopened, consumer spending catapulted higher.

But that rapid recovery also introduced an enduring bout of excess inflation. The Federal Reserve responding by radically shifting course, moving away from aggressive stimulus to a seemingly unquenchable desire to wrestle inflation back to earth. The result has been the most rapid increase in interest rates in decades. In early-2022, 30-year fixed mortgage rates hovered just a bit above 3%. More recently, they have been approaching 7%.

While some prospective buyers have simply shrugged and decided to purchase with cash, few first-time homebuyers are thusly empowered. Even when mortgage rates were low, many prospective first-timers were pushed away from the settlement table by elevated home prices. Higher mortgage rates have simply compounded their frustrations. The share of first-time homebuyers has generally ranged between 30-40% over the past decade according to the National Association of Realtors’ (NAR’s) 2022 Profile of Home Buyers and Sellers. But recently, first-time homebuyer share of purchases fell below 30%, attaining its lowest percentage since NAR began reporting such data in 1981.

Though the Federal Reserve has managed to oversee some reduction in headline inflation, price increases remain uncomfortably rapid. When excess inflation initially began to rear its hideous head, supply chain issues were front and center. While demand skyrocketed early during the economic recovery period, intermittent Covid spikes interfered with global production and distribution, resulting in scarcity and attendant price increases.

While global supply chain issues remain apparent, data indicate that the peak of these challenges occurred at some point in late-2021. Since then, production and trade flows have substantially normalized despite raging conflict in Eastern Europe.