We all read at regular intervals about various polls measuring "consumer confidence". While the term sounds squishy in meaning, it's pretty simple: high consumer confidence means that people largely feel that their economic circumstances are and/or will improve over a future period of time. Inflation plays a big role in these feelings, which is why consumer confidence is likely to keep declining now, until prices stop going up so quickly. Another factor has to do with job security and the prospect of salary raises going forward. Many millennials have no concept of shrinking wages, as they have been sought after and handsomely compensated in many industries. Politics also have an influence on satisfaction, since any uncertainty tends to make people nervous, and cause them to lower expectations.
Real estate of any kind, as a long-term and illiquid purchase which is often discretionary, at least in the short run, is prime for being affected by consumer confidence. Feelings of economic well-being would obviously make someone more likely to undertake a big purchase, as opposed to another person who is unemployed, underemployed, or otherwise disadvantaged. For a long stretch now, consumers have felt that they had a high degree of mobility and improvement in their jobs and their personal circumstances. Older people, on fixed incomes, often feel much less sanguine about the cost of housing, as do recent graduates, especially those with high student debt. Rapid recent inflation is beginning to affect the rest of the population, and suddenly houses seem out of reach.
Although these psychological explanations are reasonable, there are countervailing currents. First of all, rental rates are rising as fast, or faster, than housing prices, so you need to pick your poison. Secondly, 7% may seem high right this instant, but is not historically out of line, and could easily go up further. Finally, there is always a drive to get into a market that has already risen, leading to sales past the point when demand has begun to drop.
Those pressures mean that sellers who price well and don't get greedy, can still hope for a good fall sale. And buyers can finally compete, making the current market a good bet for them.