But supply and sales are still down, because inventory is really tight. Less supply can affect prices just like less demand can.
> Is the market going to be flooded with people downgrading and moving into rentals? Prob not. For every old couple downgrading there's a younger couple needing to upgrade for more space due to WFH and/or kids or a first time homebuyer ready on the wing.
But that's just it. Those old people aren't downgrading because it doesn't make sense for them to downgrade. They would only be paying more for less, so why bother? That younger couple that needs to upgrade for more space is even more screwed in this kind of market.
> But there will be no magical new housing starts. Construction costs (labor/materials) unlikely to drop meaningfully.
Yes, but that isn't really the point right now. There are still plenty of ongoing projects in my neighborhood that were started before rates shot up. That is significant amounts of new supply, but it is balanced by much fewer second hand homes on the market.
> And when the Fed reverses course - prices will jump.
The economy is whacked by inflation right now, you better believe that the Fed has gotten religion in considering housing costs as part of their inflation measure. So...as long as housing costs keep rising, interest rates are going to stay high anyways. Given how many people are now asset heavy, with speculation and everything, don't count out some kind of political solution to get out of the hole.
> I don't see how prices drop as some might hope (first time homebuyers) in the near future.
I agree, but that doesn't mean the market is stable.