It’s no secret that home prices across the country have been on the rise since the start of the pandemic due to low inventory and high demand. Now, we’re four months into 2021 and prices are still creeping upward. In fact, in many markets we’re seeing home prices at all-time highs, so what does this mean for the future of property pricing and the other major concern – inflation?
February saw a decline in sales, but…
“The market is still outperforming pre-pandemic levels” according to Lawrence Yun, the National Association of Realtors chief economist where he also remarks on how February inventory was at a historical low.
That all-time high mentioned? Well, the median sale price went up 17 percent year-over-year to $328,350, according to this Redfin.com article. The same article also remarks asking prices are also at an all-time high, a 10 percent increase from the year prior, at $349,975. If you’re curious about how prices in 2020, and so far in 2021, have compared to previous years, here are some stats from statista.com that show the average sale price of new homes sold in the U.S. as far back as 1965.
How will this affect the cost of living?
Despite rising home prices, the low interest rates on mortgages seen throughout 2020 have managed to keep new homeowners’ monthly payments down. Now that interest rates are on the rise (now at 3.17 percent, a 0.08 percent rise from the week prior, and 0.12 percent from the week prior to that according to Freddie Mac) and sale prices are continuing their upward trend, that means increasing monthly payments for home buyers.
Does this mean home prices will decline?
A decline in home prices any time soon is unlikely, despite increasing mortgage rates. Since the start of the pandemic, new home construction has slowed significantly, which means the high home prices are likely to stick around for a while longer as demand remains high, and inventory remains tight.
Does this mean rent prices will rise too?
Contrary to what you may think, no, rents haven’t been rising to match rising sale prices. Though this article from theatlantic.com states rents are rising, they are still affected by the housing crisis we saw during the pandemic. A result of college students staying home instead of moving out and many other renters moving back in with family caused a decrease in demand for rental units, thus lowering the asking prices of rental units. In fact, apartmentlist.com states the rise in rent prices in February and March of 2021 has outpaced the growth of previous years, indicating a rebound in rental prices, but not necessarily that they will be unusually high.
The Federal Reserve states the ideal inflation rate is roughly 2 percent. Recent events have raised concern about inflation levels but the rate of change for all urban consumers from December 2019 – December 2020 hit 1.4 percent, the lowest average change since 2015. For shelter specifically, the percent change was 1.8, also the lowest over those same five years. As for 2021, Bloomberg predicts the unemployment rate among laborers to prevent the inflation rate from exceeding 2 percent by the end of the year.
In the end
Homebuyers are still on the hunt or returning to market and sellers are slowly becoming more comfortable and willing to start advertising their properties. Real estate and mortgage professionals are still in high demand and need reliable and accurate tools to power their sales. The Warren Group’s suite of Data Analytics solutions are able to turn raw data into actionable insights so you can track trends, look for risk, identify new opportunities, and keep an eye on the ever-changing market trends in real estate. Reach out to a data specialist today to discuss how our tools can fuel your success.