While current 7.05% 30 year / 6.4% 15-year rates are bad, the math for sellers not to sell gets stronger and stronger.

The difference in interest on a 500k loan locked at 3% is now about $20,000 per year, which has a present value of roughly $300,000. In other words, paying off a 500k 3% mortgage creates a windfall loss for the seller of about 300k.

Let’s say this same house was purchased for 600k and is now 1.2m. That’s a savings of about $6,600 per year, or about $99,000 is present value.

The seemingly permanant increase in inflation expectations, in particular rent inflation, increases the value of a home to both buyers and sellers. Further, that same high inflation will hit construction costs, including both new construction and full renovations.

More and more I think people are becoming accepting of inflation, resigned to paying higher and higher prices with a sigh, and in many cases eager to lock in prices now before further inflation.

In short, while I acknowledge prices are objectively high, I think they will continue to increase.