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While inflation is 10 times higher now than 60 years ago, home prices are 24 times more expensive, a new study found.
If home prices increased at the same rate as inflation since 1963, the median price of a typical house in the U.S. would be $177,511, according to a new research report by Clever, a real estate data company.
While mortgage rates have contributed to high costs, supply and demand have also affected the price growth of homes in the U.S., Brannon said.
“When demand for other consumer products comes up, or when it increases, it’s usually not too hard for people to scale up supply,” Brannon said. “Whereas houses take months to build at a time.”
The average time to complete a newly built single-family home is about 9.6 months, according to the 2022 Survey of Construction conducted by the U.S. Census Bureau.
Zoning restrictions, along with prohibitive land costs, can also make it hard to even secure the opportunity to build a new home, Brannon said.
To increase housing supply, local policymakers would need to lower the barriers for builders by easing land-use and zoning regulations, which determine factors such as the maximum height of a building or the minimum size of a lot, C. Kirabo Jackson, an economist and member of the White House Council of Economic Advisers, previously told CNBC.
“Production can’t move as quickly in housing as it does in other industries,” Brannon said. “That often means the price goes up when there isn’t enough supply to meet demand.”
The affordability crisis for homes in the U.S. is a primary political issue for many Americans. More than half, 53.2%, of U.S. homeowners and renters say housing affordability is affecting their decision on who they plan to vote for in the upcoming presidential election, according to a Redfin-commissioned survey. Qualtrics conducted the research in February by polling 3,000 U.S. homeowners and renters.
Moreover, current housing affordability makes 64.2% of owners and renters have negative feelings about the economy, Redfin found.
In fact, affordable housing is a pressing topic for both liberal and conservative voters. The topic is ranked as No. 1 for liberals while it’s No. 3 for conservatives, according to a separate survey by the Real Estate Witch.
“It’s just something that doesn’t come up as often in polling … but when you do ask, it really resonates with people that think about how expensive housing is today,” Brannon said.
To address the issue, President Biden announced in early March as part of his budget for fiscal 2025 a plan to cut housing costs, boost supply and expand access to affordable housing.
Biden also called on Congress to pass a mortgage relief credit that would provide a $10,000 tax credit for first-time homebuyers and a similar tax credit of up to $10,000 to families selling their starter home.
“It’s encouraging that the administration is looking at a range of options to expand housing supply,” said Brannon in a statement. “Interventions like these are absolutely required if the U.S. wants to avoid an even worse reality regarding a lack of home affordability.”
In a separate action last month, the White House, the Federal Housing Administration and Ginnie Mae, the government-owned guarantor of federally insured home loans, announced an increase on loan limits and broadened lender requirements for the Title I manufactured housing lending program.
“Manufactured homes in this time of historical lack of affordability are a real option for many households,” said Susan M. Wachter, a professor of real estate and finance at The Wharton School of the University of Pennsylvania. “This change enables access to affordable financing for manufactured homes.”
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Buyers are typically looking to land a new home before their children’s new school year while a seller’s house benefits from the fresh flowers and renewed greenery post-winter.
“It’s sort of an ideal time for both buyers and for sellers, and that’s why we just see a lot more activity that time of year,” said Amanda Pendleton, a home trends expert at Zillow Group.
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However, sellers might benefit from waiting until June to put up their property for sale.
In 2023, homes listed in the first two weeks of June sold for 2.3% more, a $7,700 boost on a typical U.S. home, according to a new Zillow analysis.
“We’ve learned that real estate cycles don’t always happen [at this] time of year,” said Melissa Cohn, regional vice president at William Raveis Mortgage.
The typical spring home shopping season has been “flipped on its head” due to an unusual market over the past four years, Pendleton said.
Trends started shifting when the country locked down in March 2020 at the start of the Covid-19 pandemic: “There was no market that year,” Cohn said.
Throughout 2021, buyers were purchasing homes no matter the month or season, given ultra-low mortgage rates and flexible remote-work policies that led many consumers to relocate. Then when March 2022 came around, the market stalled as mortgage rates began to rapidly increase, Pendleton explained.
While buyers were still holding back last year, there was a slight return to seasonal behaviors, she said.
While some experts may see a continued trend toward normalization, “the good old-fashioned spring selling season” hasn’t been seen in several years, Cohn said.
“I think people have become sort of more year-round in terms of their attitude towards real estate,” she added.
In fact, while there may be more buyers and sellers in the coming weeks, a second surge is anticipated in the summer — an “extended home shopping season,” Pendleton said.
With the Federal Reserve expected to begin cutting rates as soon as the summer, there could be a renewed surge in buyer demand, experts say.
“People are hoping the first rate cut will be at the beginning of June. That hopefully will ignite a summer selling season,” Cohn said. “The direction of mortgage rates over the course of the next two years is probably a downward one.”
However, when mortgage rates begin to come down, buyer demand will rise, Pendleton said.
“We could see a bit of a bump in terms of home prices with that added competition,” she added.
Meanwhile, home prices are still elevated.
The median U.S. home sale price is $412,778, up 6.6% from a year ago, according to Redfin data, which is not seasonally adjusted. The recent boost in supply isn’t enough to meet the pent-up demand in the market, according to Redfin.
Yet if you can afford to buy a property now, it may be smart to do so and refinance later. That allows you get in and out of the real estate market, Cohn said, “before the mad rush happens and rates really start to come down.”