By artificially repressing mortgage rates via the purchase of over $1 trillion in mortgage backed securities in less than 2 years, they massively incentivized demand, both owner demand and investment demand. 2020 was when those MBS purchases started, and the whole design of it was to stoke demand and inflate asset prices via the wealth effect. By engaging in quantitative easing specifically in the MBS market, they created massive demand and price inflation in the residential housing market. For-sale supply simply can’t keep up with that much demand when it’s artificially created via QE.

The unwinding and sale of these $2.3 trillion on the balance sheet will help normalize the market, but it’ll take time at the rate they are going. IMO, this is by far the biggest reason for the rapid price increases since 2020 when rate repression began. The RE market is slow, and QT is slow, it’ll take time for these distortions to be worked out of the market. The next recession may also help work out the distortions, since the last technical recession was offset by trillions in QE, including all that MBS purchasing. A recession without QE should normalize a lot.