The Housing Market Is Crazier than It’s Been since 2006
The comments below are an edited and abridged synopsis of an article by Nicole Friedman
The past 12 months have been the hottest for home sales activity in 14 years. Home values are rising all over the US, and median sale prices in dozens of metro areas have posted double-digit percentage increases from a year ago.
Mortgage rates sit near historic lows. Millennials are entering their 30s, the typical age of first-time home buyers. The pandemic has spurred new demand for working from home. Many who kept their jobs in 2020 were able to save due to stimulus cheques, forbearance on student loan payments and less spending on travel and entertainment.
Supply is tight. New-home construction fell during the 2007-09 recession and has remained low. Homeowners are staying in their houses longer. The number of homes for sale in March was roughly half of what it was a year ago.
Single-family house prices across the US rose 12% in January from a year earlier, marking the biggest annual increase in data going back to 1991. In February, the median existing-home price rose 15.8% from a year earlier to $313,000.
Spring is typically the busiest season for home sales. But there are unlikely to be enough new listings to cool the market. Nationally, there was a 2-month supply of homes on the market at the end of February, near an all-time low.
Even high-priced cities where sales plunged last spring—Manhattan, San Francisco—are showing signs of growth.
Home builders are increasing construction to meet demand. New construction is up from recession-era lows, but the US still has a shortage. Home-building ramped up over the summer, but construction is limited by high lumber costs, material bottlenecks and a shortage of land and labour.
Demand is expected to remain robust this year, with demographic-driven strength continuing as millennials and Gen Zers get older. Still, price growth could slow as more homes come on the market. Rising mortgage rates, which sit at the highest level since June, could price some buyers out of the market later this year.