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Housing Market Resilience: Why the Current Tight Supply and Higher Rates Signal a Rebalance, Not a Downturn

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  Published in House and Home on Tuesday, December 23rd 2025 at 2:05 GMT by KTBS

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Why the Housing Market’s Long‑Term Trends Should Keep You Optimistic

In a feature that has already sparked discussion across local and national forums, KTBS’s Tom McKee, a real‑estate analyst with more than three decades of experience, lays out the case for hope in the current U.S. housing market. Drawing on historical data, recent price trends, and the cyclical nature of real‑estate, McKee explains why the present environment—characterized by higher mortgage rates, tight inventories, and shifting buyer demographics—does not signal a prolonged downturn but rather a “rebalancing” that will ultimately favor homeownership.

1. A Look Back: The 2008 Crash and the 2012 Recovery

McKee begins by revisiting the 2008 financial crisis, when falling home values and surging foreclosures nearly erased a century’s worth of wealth. He points to the Federal Housing Finance Agency (FHFA) House Price Index, which fell roughly 30 % from 2006 to 2011, and notes how, since the market’s bottom in 2012, the index has climbed almost 40 % to the current year. The article cites the National Association of Realtors (NAR) and the U.S. Census Bureau for recent sales data, noting that new‑home sales surged by 7 % in 2022, the highest rate in a decade, and continued that momentum into 2023.

McKee emphasizes that the 2008 crash was a rare, extreme event that prompted regulatory reforms—most notably the Dodd‑Frank Act and the creation of the Consumer Financial Protection Bureau (CFPB). These changes tightened lending standards, reducing the risk of another bubble. As a result, the housing market’s resilience has improved.

2. The Current Landscape: Rising Rates, Tight Supply, and Shifting Demographics

A core argument in McKee’s piece is that the present market conditions—higher mortgage rates and a constrained supply—are “normal” within the housing cycle.

Mortgage Rates: According to Federal Reserve data linked in the article, the 30‑year fixed‑rate mortgage average sits at 7.3 % in late 2023, a steep climb from the 3.5 % average during the 2015‑2019 boom. McKee notes, however, that even at these rates, the cost of borrowing is still historically low compared to rates in the 1980s and early 1990s, when rates routinely exceeded 10 %.

Inventory Shortage: The article points to the NAR’s latest quarterly report, which shows the national inventory of homes for sale falling to just 1.2 months of demand in September 2023—below the 3–6 month benchmark that historically indicates a balanced market. McKee explains that the supply shortfall is largely a consequence of rising construction costs and zoning restrictions in high‑growth regions.

Demographic Shifts: McKee also underscores how the Millennial and Gen Z cohorts—now the largest group of potential homebuyers—are gradually shifting from renting to purchasing. He links to a Harvard Business Review study that indicates this generation’s preference for “flexible ownership structures” (e.g., fractional ownership and community land trusts). The article argues that these innovative financing models may ease the pressure on traditional inventory levels.

3. The Mechanics of a Market Rebalance

McKee breaks down how a real‑estate market “rebalance” typically unfolds:

1. Rate‑Driven Affordability Pressure: As rates rise, potential buyers reassess their financial capacity. Sellers, often holding mortgages at lower rates, may price homes more aggressively to capture market share.

2. Supply Response: Builders and developers, reacting to the price spike, begin new construction projects. Although the initial lead time is long—usually 12–18 months—this influx eventually expands inventory.

3. Price Stabilization: With increased supply, the market shifts from a seller’s to a neutral or buyer’s market. Prices may pause or even decline slightly, but the rebound usually preserves the upward trajectory over the long term.

McKee references the Case‑Shiller Home Price Index for the last 30 years, noting that after each peak there has been a period of “softening” followed by a new, higher baseline. He uses the example of the 2001 dot‑com bust, where prices fell for a year before stabilizing and climbing again in the mid‑2000s.

4. The Role of Policy and Innovation

Policy measures have a significant impact on the housing market’s trajectory. McKee highlights several initiatives:

• Low‑Interest Rate Programs: The Federal Housing Administration (FHA) and Veterans Affairs (VA) continue to offer 30‑year fixed‑rate loans with favorable terms. McKee points out that as of September 2023, FHA rates average 6.9 %—still competitive relative to conventional rates.

• Rent‑to‑Own and Shared Equity Schemes: The article links to a Brookings Institution report that showcases pilot programs in California and New York that enable renters to acquire equity in their homes through monthly contributions toward a down payment. McKee argues these models help bridge the gap between renting and owning in high‑cost markets.

• Zoning Reform: The article cites KPMG’s “Urban Housing Outlook” and notes that some municipalities are easing restrictions on accessory dwelling units (ADUs), which could boost supply without extensive new construction.

5. Lessons for Homebuyers and Sellers

McKee provides actionable takeaways for both sides of the market:

For Buyers:

• Lock In Rates Early: Even if rates appear high, securing a rate early can hedge against future increases. He advises using a “rate‑lock” with a reputable lender.

• Explore Alternative Financing: Consider FHA, VA, or down‑payment assistance programs, especially if you have limited cash reserves.

• Location, Location, Location: High‑growth metros with solid job markets and infrastructure investments—like Austin, Nashville, and Raleigh—will likely see continued price appreciation.

For Sellers:

• Price Strategically: While it’s tempting to hold out for a “perfect” price, McKee warns that the market’s tight inventory means that pricing too high could lead to longer days on market and eventual price reductions.

• Home Improvements Matter: Investing in energy‑efficient upgrades—solar panels, insulation, and smart home tech—can add value and appeal to the modern buyer.

• Leverage Professional Staging: A well‑staged home can command a premium, as data from the NAR shows staged homes selling 1.2 % faster on average.

6. A Long‑Term Outlook

Ultimately, McKee’s article underscores the cyclical, resilient nature of the U.S. housing market. He reminds readers that the current phase—characterized by higher rates, low inventory, and shifting buyer demographics—represents a temporary adjustment rather than a long‑term contraction. The evidence from the past two decades suggests that markets recover and continue to grow, even after periods of volatility.

He closes with a note of encouragement: “The real estate market has weathered many storms, and every downturn has been followed by renewed strength. If you’re a buyer looking for a place to call home, or a seller hoping to capitalize on a robust market, the current conditions are still ripe for opportunity.”

Key Takeaways

By weaving together data, history, and forward‑looking policy analysis, McKee’s piece offers a comprehensive, hopeful perspective that aligns with the long‑term trend of rising home equity and market resilience. Whether you’re a seasoned investor or a first‑time buyer, the article reminds us that the housing market, like all markets, is a living system that, after adjustments, tends to move upward over time.