A little more than six months ago there were narratives circulating that national housing prices were in an even bigger bubble than the one twenty years ago and headed for an “inevitable” collapse. Given that national home prices dropped about 27% from peak to bottom in the last housing bust, that would be something to worry about.
But we pushed back against this theory and, so far, a collapse in home prices hasn’t happened. National home prices declined 0.2% in March according to the Case-Shiller index, but rose 0.1% according to the FHFA index. In the past year, home prices are up 0.7% and 1.7%, respectively, according to these two widely-used measures. In other words, no collapse.
Instead, what we have is a very slow upward trend. Notably, home prices are climbing slower than general price inflation and at the slowest rate since the bottom of the housing bust in 2012.
Some might claim this is due to higher mortgage rates, but that doesn’t make sense. Mortgage rates were higher back in 2023-24 when home price growth was faster.
What has changed, and what we think are the keys behind slower home price appreciation, is that the growth rate of the money supply has remained slower than the pre-COVID trend and a huge shift in immigration policy that started in early 2025, when the US went from admitting 2.7 million net new immigrants per year to roughly zero, on net.
The sudden lurch to much lower immigration has meant more rental units are available than would otherwise have been the case, likely surprising many landlords. Zillow’s observed rent index is up only 1.9% from a year ago and rent growth has lagged general price inflation by the most in at least the past decade.
Read more: Not So Bad
