Fortune

Entering into 2022, the consensus among much of the real estate industry was that the spring housing market—the industry’s peak season—would be a bit less frenzied this year. After all, it couldn’t get much worse than the 2021 spring housing market, when over 70% of home listings saw a bidding war, right?

Unfortunately for would-be homebuyers, that conventional wisdom has shifted. Not only does the spring housing market look like it’ll be red-hot, there’s a chance this goes down as the hottest spring homebuying season ever. Already, bidding wars are picking up again.

“Spring buying has sprung, and it’s wild and it’s crazy out there. It is causing some frustration at this point in the real estate market,” Devyn Bachman, vice president of research at John Burns Real Estate Consulting, told Fortune.

The housing market is coming off a year in which U.S. home prices soared an unsustainable 18.8%. So how can the market still be so hot? To explain what’s going on, Fortune built three charts showing where the housing market stands as we enter the spring season.

When the pandemic struck, national real estate groups projected that the housing market would enter into a slump. But it didn’t happen. Instead, by the summer of 2020 the housing market was booming as first-time millennial homebuyers, who were enticed by record low mortgage rates, rushed in to buy. That uptick in homebuyer demand saw inventory dry up. By the spring of 2021, housing inventory was down 32% from pre-pandemic levels. With buyers outnumbering homes for sale, they had no choice but to offer over listing price if they wanted to win. Cue record bidding wars last spring.

Industry insiders had hoped that inventory levels would begin to rise heading into this year. The thinking was that more elderly homeowners, who were cautious about moving during the pandemic, would begin to list their homes once they got the vaccine. Additionally, it was expected that some struggling homeowners who were exiting the COVID-19 mortgage forbearance program—which began to wind down in September 2021—would list their homes.

Inventory levels did begin to rise last fall, but that fizzled out by November as the number of homes for sale began to shrink again. Indeed, inventory levels in January were 42% below January 2020 levels. Among the 327 housing markets tracked by Zillow, 254 have inventory levels that are down by more than 30%. Simply put: The housing market is even tighter now than it was heading into the frenzied spring 2021 housing market.

“There is no inventory, and there is no more patience either. If you’re a seller and selling your home and you don’t need to buy another one, life is pretty darn good right now. You’re receiving multiple offers and probably selling it well over asking [price],” Bachman says.

Every single forecast model reviewed by Fortune in November predicted that home price growth would decelerate significantly in 2022. But just two months into the year, we’ve already seen that consensus break apart.

Heading into the year, Zillow predicted the 12-month rate of home price growth would decelerate to 11% by the end of 2022. However, it got more bullish in January—with the home listing site revising that 2022 home price growth rate up to 16.4%. Earlier this month Zillow once again decided even that rate was too conservative. Now, Zillow expects the year-over-year rate to peak at 21.6% in May (which would set an all-time record) and to end the year at 17.3%.

The main reason for the bullish outlook is tighter-than-expected inventory levels. Another culprit is the swift move up in mortgage rates. Back in December, the average 30-year fixed mortgage rate issued was 3.11%. As of Friday, that 30-year rate is up to 3.92%.

In the long term, rising mortgage rates could slow down the housing market. After all, each uptick in mortgage rates prices out some buyers from the market. But the short-term impact is the opposite: Worried that rates will continue to shoot up, more homebuyers plunge into the market.

“Rates have ticked up, but they’re still lower than the historic norm. So it has increased buyer urgency. It’s the fear of future higher mortgage rates and the fear of future higher prices,” Bachman says.