The median price of a home has risen 16% from last year, according to the National Association of Realtors, and they have increased even more in some regions of the country like the Northeast and West, which are both up 21% from last year.
Meanwhile, inventory has continued to linger at record lows. In February, the number of available homes for sale was down nearly 30% from a year ago.
Frustrated buyers want to know when does this end?
“In the second half of this year we will see higher mortgage rates and, as they tick up, it will cool,” said Brad Dillman, chief economist at Cortland, a multifamily real estate development company.
“Homes will sit on the market longer, markets will accumulate more active listings. Home building will continue and new homes will pile up a bit. Those will continue to moderate price appreciation.”
But that won’t mean homes will become that much more affordable for buyers.
Home prices were up 10.4% at the end of 2020 compared with the year before, according to the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, with cities like Phoenix, Seattle, and San Diego seeing the largest price gains.
“I don’t think people are getting a 10.4% increase in their income or saving rate to substantiate those gains,” said Dillman. “It is competition for a home that is driving the price up.”
Why are there no houses to buy?
Even in a sellers market, many people are avoiding the scrum they would face in finding their next home and are staying put, said Liz Brent, broker and founder of GoBrent, a real estate firm in Maryland.
Millions of homeowners took advantage of record low interest rates over the past year to refinance into a lower rate, more affordable payment or shorter loan term on their current mortgage. Those homeowners aren’t likely to move soon, said Brent.
In addition, another 2.57 million homeowners are in forbearance programs
with their lenders, according to Black Knight. Those homeowners may ultimately sell to find a more affordable living situation, but not right now.
While homebuilders are making strides
in bringing more inventory to the market, homebuilding dropped to a six-month low last month, according to the Commerce Department. The setback, partially due to severe cold weather in many parts of the country, only exacerbated inventory challenges.
“People want to think that this is coronavirus-related,” Brent said. “Yes, there are people who don’t want to sell because of the pandemic, but we are in a housing crisis that has been building for years.”
And greater competition for fewer homes that sell at ever higher prices is moving the goal posts for many would be buyers who are trying to save, especially first-time buyers.
“Unfortunately when you have 5, 10, 15, 25 offers on a house, the only buyers that get homes are buyers that are extremely financially secure and buyers who are willing to say ‘I’ll pay almost anything’,” Brent said.
Buy now or sit it out?
Even as inventory shrank over the past year, the pool of buyers has grown, said Carlo Siracusa, president of residential brokerage at Weichert.
“The inventory will remain tight for a while because there are all these buyers coming into the market — urban dwellers, Millennials, first time buyers — looking for bigger space or to live somewhere new,” he said.
Siracusa doesn’t think it makes sense to wait if you are ready to buy now. “Interest rates will go up. But there’s no indication that real estate prices will go down. Demand is strong, supply is low.”
More inventory is expected to become available later this spring, said Danielle Hale, chief economist at Realtor.com. That will at least provide more selection, but not necessarily price relief.