This report was generated by GPT-5
U.S. house prices rose at an unprecedented pace from 2020 through 2022. By July 2021, national home prices were up 19.3% year-over-year, a record high growth rate. This surge followed a long period (2013--2019) of moderate ~5% annual price gains. To investigate this sharp price acceleration, we analyze seven hypothesized drivers:
- Monetary Stimulus Shock -- The infusion of liquidity and low interest rates during COVID-19\
- Supply Chain Breakdown -- Construction material shortages and building delays\
- Geographic Reshuffling (Remote Work) -- Pandemic-era migration from dense cities to more affordable areas\
- Millennial Demographics -- A wave of first-time homebuyers reaching prime homebuying age\
- Institutional Investor Surge -- Increased home purchases by investors and corporations\
- Mortgage Rate "Lock-In" Effect -- Low-rate mortgages discouraging existing owners from selling\
- Square Footage Demand Shift -- Heightened desire for larger homes (home offices, more space)
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The sharp rise in U.S. housing prices from 2020 onward was multi-causal, but not evenly so. Empirical evidence indicates that extraordinarily expansionary monetary policy and low interest rates were the dominant catalyst for the pandemic housing boom, turbocharging demand when the market was supply-constrained. In concert with that, a pre-existing housing shortage -- worsened by supply-chain disruptions and later by homeowners locked into low-rate mortgages -- meant supply could not respond, amplifying price pressures. These two factors -- demand stimulus and constrained supply -- explain the bulk of the price surge. Layered on top were pandemic-specific shifts: remote work enabled millions to relocate or seek larger homes, adding a further bump to demand for certain types of housing. Favorable demographics provided a deep pool of eager buyers in their 20s and 30s. And investors poured in, though mostly riding the wave rather than creating it.
In summary, the sharp rise in U.S. housing prices post-2020 was overdetermined -- many forces pointed the same direction. But quantitative evidence indicates the COVID monetary stimulus and low-rate environment lit the match, colliding with a housing supply tinderbox to set off the blaze. Other factors -- remote work migrations, millennials finally buying, investors piling in -- all added fuel to the fire, but were not the initial spark. Understanding this hierarchy of causes is crucial for crafting effective housing policy and for anticipating how the market might evolve as some factors (e.g. rates) normalize while others (like supply and demographics) persist.