Housing prices increased sharply in the first two years after the start of the pandemic, while housing inventories fell to historically low levels. According to an Economic Letter from the Federal Reserve Bank of San Francisco, titled “Pandemic-Era Demand Squeezed Housing Inventories,” this decline in available homes was primarily caused by a surge in demand rather than a reduction in supply.

The authors of the letter—John Mondragon, Adam Shapiro, and Valeska Fresquet Kohan—analyzed market data and found that unusually high demand for housing was the main factor behind the inventory squeeze during this period.

A video accompanying the Economic Letter features John Mondragon, research advisor at the San Francisco Fed, discussing how housing demand shifted during and after the pandemic.

The views expressed in this analysis do not necessarily reflect those of the management of the Federal Reserve Bank of San Francisco or the Board of Governors of the Federal Reserve System.

John Mondragon is a research advisor, Adam Shapiro is a vice president, and Valeska Fresquet Kohan is a research associate—all with the Economic Research Department at the Federal Reserve Bank of San Francisco.