U.S. housing is experiencing a historic “reversion to the mean.” In other words, the formerly sizzling metros have gone cold, and the unsexy plodders are back in vogue. That point comes through vividly in the new market snapshot just released by the highly influential American Enterprise Institute Housing Center. The AEI data, compiled by codirectors Ed Pinto and Tobias Peter, shows that housing prices nationwide edged up a puny 1.1% in the 12 months ended in February, the slowest rate of appreciation since the AEI started collecting numbers at the start of 2012. (The think tank started reporting the year-over-year changes in 2013.) It gets worse: The AEI is projecting that for the first three weeks of April, the trend will go negative, and by the end of this year, single-family houses on average will be fetching 1% less than at the start of 2026, with drops of 2.0% to come in both 2027 and 2028. Obviously, those numbers are trailing the current course of the consumer price index, so the lesser amount you’d get selling your house in 2028 would take a second hit from today’s high inflation.
Those startling stats mark a stunning reversal from the post-pandemic boom. From 2013 to early 2020, home price appreciation (HPA) consistently registered at between 5% and 7% a year. Then, the Fed supplied the rocket fuel by slashing interest rates, sending mortgage costs plummeting from around 4.6% in late 2018 to 2.6% at the start of 2021. Prices took a moonshot as buyers could pay much more for the house and still comfortably make the monthly payment because of the bargain home loans. By early 2022, HPA was roaring at an annual tempo of roughly 18%, triple the pre-pandemic number.
