After cooling off slightly toward the end of 2021, home price gains reaccelerated to 19.2% in January, up from 18.9% in December.

In total housing prices have risen more than 32% over the last two years, a growth rate exceeding even that seen before the famous Financial Crisis/Housing Crash of 2007, when the home market – and the economy – collapsed.

But there are some big differences. The Crash resulted from a housing bubble built on rampant speculation, and too-easy credit. So many borrowers defaulted, that the securities backing their mortgages collapsed as well.

Savvy investors who saw the weakness in these bonds had invested heavily in hedge funds betting against their success. When millions of homeowners began to default the house of cards collapsed.

Today’s prices are built more on sound economic principles – namely, the huge mismatch between supply and demand. As such, no price crash seems imminent.

Mortgage rates are rising rapidly, especially after the Federal Reserve raised its baseline rates in an aggressive move against persistent consumer price inflation.

For now, the availability mismatch is still producing strong demand and supporting high prices, but pending home sales - signed contracts on existing homes - fell for four straight months heading into May. Affordability is still a concern for the market.

More aggressive tightening of monetary policy, along with rising inflation, has investors selling out of shorter-dated Treasury in favor of long-dated government debt, inverting their yields, and thereby creating concern for the health of the economy.

Inverted yield curves historically signal looming recession, but analysts are hopeful that this time it signals that Fed policy is on the right track, with strong jobs numbers and a booming economy.

The housing sector is very important to the U.S. economy. Low interest rates undoubtedly pulled forward some home price appreciation, and the massive appreciation in prices will unfortunately lock some prospective first-time buyers out of the market.

But it’s hard to see any imminent crash. Demand is simply too strong while supply is too limited.