The Price Is Wrong for Housing

Lower rates would make U.S. houses more affordable, just not affordable enough.

The pandemic set off a flurry of demand for housing. Americans’ newfound desire for space, the padding of U.S. household finances from government relief checks, and sub-3% mortgage rates were a potent mix that sent home prices skyward. Now the buying frenzy has passed and, with mortgage rates at their highest levels in over 20 years, not many homes are getting sold at all.

Yet high home prices have proved more than sticky. On Tuesday, S&P Dow Jones Indices reported that the S&P CoreLogic Case-Shiller National Home Price Index hit a new record in September, putting it 3.9% above its year-earlier level.

The big reason why home prices have stayed so high is well known: Current homeowners, carrying mortgages that are far below today’s rates, are unwilling to move, and that has placed severe constraints on the supply of homes.