Recent housing data have revealed a surprising resilience in both activity and prices, bucking the conventional wisdom that a deeper correction is all but certain given the sharp rise in home values during the pandemic and the most aggressive monetary policy tightening in over four decades, which saw mortgage rates more than double by the turn of the new year. After all, housing prices, as measured by the S&P CoreLogic Case-Shiller 20 City index (CS20), were up a staggering 40% from June 2020 through June 2022’s peak reading, while mortgage rates surged to 7% by the fourth quarter of last year, up from 3.25% at the end of January 2022. On its face, this set-up would appear to be an ideal breeding ground for a meaningful correction in prices, particularly given the durability of elevated, broad-based inflationary pressures still afflicting consumers today. While a deeper correction is surely possible, particularly given the very real prospect of tighter credit in the wake of last month’s bank failures (SVB/SBNY), thus far, prices have held in remarkably well. Indeed, CS20 housing prices are down a mere 5% from last June’s all-time high, erasing only a small portion of the 40% surge seen during the pandemic.
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