In 2018-2019, real estate company Zillow showed “for sale” inventory of U.S. homes between 1.2 and 1.4 million units. After the pandemic in 2020, that “for sale” inventory began a sharp decline to 440 thousand units in March 2022. In other words, in March, the supply of homes was about 1 million units short of, or 60-70% below, pre-pandemic levels based on Zillow’s data. At the same time supply was falling, demand was surging. Existing home sales surged by 1 million units above normal in 2020-2021, and new mortgages for purchases surged 40%. Remote work trends, federal stimulus, and record-low, sub-3% 30-year mortgages all fueled the fire. So, an average U.S. home became about 40% more expensive, based on the S&P/Case-Shiller National Home Price Index (chart, below).

S&P/Case-Shiller National Home Price Index

However, this pattern seems to be changing in the other direction. Now, the housing supply is increasing, and demand is falling. The same Zillow data, which showed a collapse in available homes for sale from 2020 through March 2022, now reveals some sizeable recent increases. Available supply from Zillow shows there are now 642 thousand units for sale, up 46% from the low point of March, for example. We see confirming trends from the National Association of Realtors (NAR) data. NAR’s most recent housing report shows a 10% inventory increase in June versus May and a 5.4% drop in existing home sales to 5.1 million homes (annual rate, seasonally adjusted). The monthly decline was the fifth in a row, and NAR cited affordability issues for buyers. 

Housing’s Importance

This all matters because housing is vital to the U.S. economy in direct and indirect ways. Housing represents a significant source of household wealth at roughly $38 trillion in value or over one-quarter of net worth. Residential housing activity accounts for around 4% of U.S. economic output and nearly 1 million jobs. The myriad of housing activities spreads like ripples across the broader economy, too. As we saw in the 2007-2009 financial crisis, financing of housing activities feeds directly into the financial system.

Above all, housing is a significant personal commitment requiring significant trust and confidence. A home is often the costliest investment a person ever makes, and mortgage debt now accounts for 65% of Americans’ household liabilities. For those who own a home, surging values convey a feeling of wealth, but for those who don’t own a home, a boom can give a sense of deep anxiety. Thus, housing goes beyond other investments like stocks and bonds, representing a fundamental form of physical and social security. Because of the size and importance of the commitment, real estate offers a window into the vital dynamic of “confidence.”


We thought we should write about real estate, even though our main focus is usually financial assets, because of how it can influence the economy, wealth, and confidence. As you can see, real estate is important because of the direct and indirect influences it can have on the broader economy. It is part of a more comprehensive view of assets exhibiting weakness this year. The discussion could extend to other speculative assets like used cars, collectors’ watches, and decentralized digital assets. 

High and rising prices, the end of various government subsidies, a surging U.S. dollar, and rising interest rates all contribute to the adjustment process. But in the future, these adjustments should again be part of regular market functioning and considered healthy. To wit, we want to point out that today’s better valuations are helping to lift longer-run expectations of returns (for more on this, please see our Q2 Tactical Asset Allocation report).

In the meantime, a focus on owning “quality at the right price” seems to be the most appropriate guiding mantra. For tactical positioning, we remain underweight stocks and overweight bonds versus our policy portfolio (for more on this, see the Q2 Tactical Asset Allocation report).


The Washington Crossing Advisors’ High Quality Index and Low Quality Index are objective, quantitative measures designed to identify quality in the top 1,000 U.S. companies. Ranked by fundamental factors, WCA grades companies from “A” (top quintile) to “F” (bottom quintile). Factors include debt relative to equity, asset profitability, and consistency in performance. Companies with lower debt, higher profitability, and greater consistency earn higher grades. These indices are reconstituted annually and rebalanced daily. For informational purposes only, and WCA Quality Grade indices do not reflect the performance of any WCA investment strategy.

Standard & Poor’s 500 Index (S&P 500) is a capitalization-weighted index that is generally considered representative of the U.S. large capitalization market.

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