Residential housing markets are unnaturally tight, with limited supply and discouraged buyers.
The proximate cause is the “lock-in effect”, whereby homeowners choose not to sell because of high interest rates taking a bite out of their paychecks.
This effect also underscores the damage stagnant wages have had. Because wages have not kept pace with inflation, mortgage payments now are a larger percentage of household income then they have been in decades. This limits purchasing power and dissuades prospective buyers from entering the market. This also therefore becomes a disincentive for homeowners to put their homes up for sale, reducing housing inventory, thus pushing up prices.
The housing market will likely remain frozen until incomes rise sufficiently to bring average mortgage payments down to long term historical averages relative to household income
