Virtually every real estate firm predicted that home price growth would slow down this year, but just a few months in, that consensus has fallen apart.

Home prices surged an unsustainable 18.8% last year, fueled by a depleted inventory and record-low mortgage rates. But with interest rates on the rise, pundits predicted the growth in home prices would cool off—at least a little—in 2022.

Zillow originally forecast an 11% increase in home prices this year, while other firms were even more conservative: Fannie Mae’s prediction was a 7.9% increase and Realtor.com predicted 2.9%. The Mortgage Bankers Association actually forecast a 2.5% drop.

But as mortgage rates climbed in January, homebuyers scrambled to get their offers in before further rate increases. According to Redfin, January was the most competitive month on record: that month, 70% of home offers written by their agents faced bidding wars.

Zillow has since updated their prediction for home prices in 2022 to rise 17.3% (after hitting a peak of 21.6% in May). Fannie Mae now predicts an 11.2% jump year over year.

In March, the average 30-year fixed mortgage rate hit 4.42% up from 3.11% in December—the biggest jump since the 1990s (though still low by historical standards). While we’d normally expect increasing mortgage rates to tamp down home prices, this isn’t a normal housing market. Stubbornly scarce inventory continues to drive up prices—and first-time homebuyers out of the market.

February inventory was down 25% from February 2021 and 48% from February 2020, thanks to continued demand from the cohort of Millennials who have hit the traditional first-home-buying age of 30. Making matters worse, the backlog of new homes approved for construction is at an all-time high as builders struggle with supply-chain issues.

At some point, rising home prices and mortgage rates are bound to cool down this red-hot housing market, but it seems less and less like it’s going to happen this year.

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