Something else seems to be driving up prices other than just "people need a place to live", and I don't see any inherit reason as to why housing prices cant go down 20-30% just like the stock market.
No one is selling; supply (active listings) is way down over the last few years, and the buyers (the ones that actually get to complete a transaction, given the few units on the market) are the relatively price insensitive, so market clearing prices are way up.
Click through any of the state listings and check the charts:
https://fred.stlouisfed.org/release/tables?rid=462&eid=11293...
If that's the case, I think this type of collective "hodl" mentality usually breaks down very quickly when even small pressure is applied as people would always try to cash out if they suspect the market has topped, but that's just a hunch.
Is there a state that hasn't seen major price increases?
Edit: Just checked, and except Alaska all states saw at least a 20% increase in the last 2 years (and quite a few had 30-50% increases)
> how much of the population are looking to buy
So if mortgage rates go higher that should mostly likely drop, no?
Which goes to my last point, the population of people wanting to purchase a home has grown.
> So if mortgage rates go higher that should mostly likely drop, no?
I don't know why so many people try to boil down markets to "A therefore B" statements. These are complex systems with 100's of different inputs plus 10's of millions of individual actors.
Interest rates don't affect just the buy side, but also the supply side. If supply drops in proportion to demand, then the marginal house will still maintain these high price levels. We could also see a pullback in less desirable areas and a leveling off or even a continued increase in prices in desirable areas. There are many different scenarios that can play out, and yes, prices could pull back...but by how much? My best guess is that prices level off or have a small pull back.
It seems pretty clear to me that the issue is more that the number of people wanting to sell a home has shrunk; active listings are way down in every state.