There are several reasons for this increase. Supply of home is low, and the number of people moving out of existing homes is falling. Millennials are starting to make their presence felt in the housing market, which may push prices up even further. High interest rates may also cause a spike in prices. But despite all these factors, the overall trend is positive. While this isn’t a sign of a bubble, it does suggest a healthy housing market.
Demand is High
If you are a first-time home buyer, you’re not likely to get sick of the rising prices. In fact, it may seem that the asking price in Salt Lake City is absurd, while the asking price in Seattle is reasonable. However, you may be competing with global capital, all-cash “iBuyers,” institutional investors renting single-family homes, and smaller investors running Airbnbs. These factors are driving up home prices in some areas of the country, such as Seattle.
This situation may be temporary. Housing supply is very tight across the country, with the median home price reaching $341,600 in April. At the current sales rate, there are only 1.03 million homes for sale, which means there is just 2.2 months’ supply available at this time. The tight supply has helped to keep home prices high and skew the housing market toward the higher end of the market. Meanwhile, the low-end is not seeing nearly as many sales, and this could lead to a housing shortage.
Supply is Low
The recent rise in home prices is due to a combination of factors. A tight supply of homes is pushing prices higher. Fewer people are moving out of their existing homes, and underbuilding of new housing has resulted in high demand. The shortage of available homes has also contributed to the rise in prices, with RE/MAX estimating that there are four to six million fewer homes than are available to meet demand.
The millennial homebuyer boom is boosting demand for houses, especially in suburban and mixed-use neighborhoods. Experts believe that the rise in home prices could last until the year 2022, when the economy will begin recovering. But there are some risks involved. Higher mortgage interest rates may cause borrowers to default on their loans, and there are scammers in the investment industry, which could increase the risk to buyers.
Interest Rates Are High
Recent reports have attributed some of the recent increases in home prices to the growing millennial population. Many of these homebuyers are settling in suburban and mixed-use areas. A massive appreciation in home prices may put off first-time homebuyers. However, the housing sector is critical to the U.S. economy and the steep rise in interest rates could be a short-lived trend.
The housing market bubble began in 2005, and the subsequent boom was fueled by slashed interest rates. Despite the recession, many aspiring homeowners decided to wait for the low interest rates to make their move. As a result, the number of available homes increased, pushing up prices. While these increases were uneven throughout the country, they generally mirrored a general upward trend in U.S. housing prices. While interest rates were low, the low supply prompted more aspiring homeowners to buy property.
The housing bubble peaked in 2008 and caused a financial crisis, and the millennials were not spared. They have yet to recover from the Great Recession and coronavirus recession and have been struggling with student debt and spiraling living expenses. In fact, millennials currently own less property than the boomers did 40 years ago, and they face increasing difficulties in saving for a down payment. But in the coming years, home prices are expected to rise exponentially and millennials will be driving the housing market.
The millennial generation is the largest group of Americans and is predicted to make up the majority of new homebuyers by 2022. The housing market will be stimulated by the millennials’ rising incomes and the pandemic. Millennials will make up the largest proportion of homebuyers, and will likely continue to do so until 2022, when it will return to seasonality. At the same time, demographic shifts are creating a new generation of homebuyers. The U.S. housing market is dominated by millennials, and millennials are entering their mid and late-thirties at an increasing rate.
There are many reasons why home prices have increased in recent years, but the biggest might be demographic shifts. The increase in older homeowners is likely to be most evident in the Northeast and Midwest, where the percentage of older homeowners is large. Similarly, fewer young adults are purchasing homes in the Northeast and Midwest. The combination of demographic shifts is causing a significant shift in home types.
In 2009, the U.S. population declined slightly, with the largest declines in the Northeast and Midwest. At the same time, the number of Baby Boomers was decreasing, which caused a shortage in younger households. This situation also contributed to overbuilding and housing speculation in those areas. While these trends have not been directly linked to the overall increase in home prices for sale by owner, it does suggest that they might be affecting home prices once again.
Availability of Homes
In April, only 1.03 million homes were on the market for sale, compared with the anticipated supply of 1.04 million for April 2021. At that rate, home prices are expected to rise by 14.9%. The tight supply has kept prices high while skewing sales toward the higher end of the market. Meanwhile, sales in the lower end are scarce, which indicates that more homes are needed to fill the shortage.
This lack of supply means that prices will continue to rise. This is because there is not enough supply of homes to satisfy demand, and because there are fewer people who can afford to buy, prices will continue to rise. According to Holden Lewis, senior economist at Nerdwallet, mortgage rates will increase more slowly than they did in recent months. However, home prices are likely to remain strong in the near term.