Last month, Redfin made headlines when it said the residential real estate landscape has shifted to a buyer’s market. A webinar from the American Enterprise Institute’s AEI Housing Center on Tuesday offered a markedly different take, maintaining that aside from Florida and parts of Texas, a “relatively strong seller’s market continues, with well-qualified buyers competing for a limited supply of homes.”

Edward Pinto, co-director and senior fellow of AEI Housing Center, observed that high mortgage rates combined with the lingering effects of extreme home price appreciation during the COVID-19 pandemic have combined to suppress home purchase activity this year.

“Thanks to the Federal Reserve’s loose monetary policies [during the pandemic], which we’ve not really recovered from, house prices are still quite elevated,” Pinto said.

Home prices are predicted to accelerate 2.6% year over year in June and 2.4% in July, according to AEI.

AEI data also showed that while mortgage purchase rate lock volume was up 2% year over year for the week ending June 27, it was down 24% from the same week in 2019, before the pandemic’s onset. A rate lock, an indicator of mortgage and housing demand, is an agreement between a lender and a borrower that the interest rate on the loan will not change during the period when it is being processed.

Pinto and AEI Housing Center Co-Director Tobias Peter also painted a downbeat picture of the national housing shortage. They noted that there’s an estimated shortage of 5.8 million homes in the contiguous U.S. Of that figure, approximately 1.4 million of that shortfall is attributable to California, with other states west of the Rockies lacking an additional 600,000 homes needed to meet housing demand.

Debt-to-income outlook

The AEI presentation noted that borrowers’ debt-to-income (DTI) ratios have continued to rise for Federal Housing Administration (FHA) purchase loans, which are typically offered to borrowers who don’t qualify for conventional mortgages.

In 1993, the average DTI was 34%, when mortgage rates averaged 7% to 8%, according to AEI. Today, the average DTI has skyrocketed to 46%, despite the 30-year mortgage rate sitting below 7% for most of 2025.

Peter said while the qualified mortgage rule implemented in 2014 as part of the Dodd-Frank Act was meant to limit excessive debt-to-income ratios, the reverse scenario has played out, with higher DTIs leading to inflated home prices that benefit sellers instead of buyers.

“The Dodd-Frank Act … was intended to constrain these excessive debt-to-income ratios, but clearly the opposite has happened,” Peter said.