According to housing industry analyst Lance Lambert, at the height of the housing boom in April 2022, we had seen 1.2 million more existing home sales since the start of the decade than if we had maintained the pre-pandemic pace.

The problem? Unprecedented monetary inflation — and that’s just for starters.

By August 2023, the housing market had flipped on its head. Today, we’re 1.8 million sales behind the normal 2019 trend.

That’s because — as we like to say around here — there ain’t no such thing as a free lunch.

Here’s what happened:

  • The Federal Reserve printed money. A lot of it. While it is frowned upon (by the Fed) to stop them from doing this, we think it would have been cool for them to just… not.
  • The Fed lowered interest rates. *Dramatically.* When you think you’re God, you tend to do things like that. Unfortunately, math always wins — and it does not like artificially low numbers.
  • People refinanced their homes. And we don’t blame them. How does one pass up generationally low interest rates? Answer: One does not.

This domino effect resulted in the housing market’s present predicament: People who bought new homes or refinanced their old ones with a 3% mortgage rate don’t want to move.

Again, we don’t blame them. A 3% mortgage rate is a great deal — one that is nowhere near the actual market equilibrium rate.

Because people aren’t moving, inventory is restricted. And because inventory is restricted, home prices aren’t coming down.

If you’re a millennial between the ages of 30 and 35, this catastrophe is occurring at a particularly inconvenient time.

Members of the largest generation in American history are ready to settle down and purchase homes… only they can’t. Because the homes are too expensive.

As usual, in trying to “help” the market, the Fed royally screwed it over.

So, what now?

If we had it our way, we’d see…

Revised monetary policy: As long as the Fed is steering the economy, its decisions will continue to impact affordability.

The long-term solution is to rethink monetary policy altogether and allow a free market system to work out the kinks. Not exactly an overnight job, but in today’s world, you need a little optimism to get by.

New construction homes: The federal government is responsible for an asinine amount of unused land. To that, we say, “Sell it off and build, baby, build.”

If we wave goodbye to zoning laws, restrictive building codes, and bureaucratic red tape, all the better. Let’s encourage home ownership, shall we?

Millennials choosing states with fewer regulations: When there’s less red tape involved, housing development is less expensive (imagine that!).

This means that when people choose to buy real estate in less regulated areas, they’re rewarded with more affordable markets. We need more of that energy in 2025.

No more money-printing: If you’ve seen the prices of groceries, clothing, and, of course, houses, then this one requires no explanation.

In short, inflation sucks and we should break up with it (preferably by breaking up with the Fed). But in the meantime, remember: TANSTAAFL.