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This story originally appeared on The Epoch Times
A shortage of housing stock combined with robust homebuyer demand and low mortgage rates sent U.S. home prices soaring by the highest annual rate on record in the second quarter, according to data from the National Association of Realtors (NAR).
The median price of an existing single-family home surged by 22.9 percent in the second quarter of 2021 compared to the year-ago period, hitting an all-time high of $357,900, the NAR said in an Aug. 12 report. The nearly 23 percent rise represents an increase of $66,800 from a year ago.
At the same time, 12 of the 183 metro area markets measured by NAR reported price gains of over 30 percent in the same period. Single-family home prices soared by 46.5 percent in Pittsfield, Massachusetts, 45.1 percent in Austin-Round Rock, Texas, and 41.9 percent in Naples-Immokalee-Marco Island, Florida.
The report also showed that 94 percent of the 183 markets measured experienced double-digit price increases in the second quarter, compared to 89 percent in the first quarter, according to the report.
“Home price gains and the accompanying housing wealth accumulation have been spectacular over the past year, but are unlikely to be repeated in 2022,” Lawrence Yun, chief economist for NAR, said in the report. “There are signs of more supply reaching the market and some tapering of demand.”
“The housing market looks to move from ‘super-hot’ to ‘warm’ with markedly slower price gains,” Yun added.
Rising home prices have been particularly hard on people looking to buy their first home, according to NAR.
“Housing affordability for first-time buyers is weakening,” Yun said. “Unfortunately, the benefits of historically low interest rates are overwhelmed by home prices rising too fast.”
While average mortgage rates remain historically low, at under 3 percent, rates rose this week after six weeks of declines, according to a Thursday report by mortgage buyer Freddie Mac, which linked the gains to the strong labor market and earnings data.
The average rate for the 30-year mortgage jumped by 10 basis points to 2.87 percent from 2.77 percent last week, the report showed. The benchmark rate, which reached a peak this year of 3.18 percent in April, stood at 2.96 percent a year ago.
Bankrate chief financial analyst Greg McBride told The Epoch Times in an emailed statement that the ongoing economic recovery and inflationary pressures are likely to push mortgage rates higher, which could have a cooling effect on housing demand.
“Mortgage rates remain sharply lower than the levels seen this spring but with a strengthening economy and higher inflation, the risk is definitely to the upside,” McBride said.
The housing market has tightened considerably during the pandemic, driven primarily by a surge in demand, according to a July analysis by the Federal Reserve.
“Consequently, the relaxation of any pandemic-caused supply-side constraints will likely do little to cool the market. New demand has exceeded even pre-pandemic levels of supply, and the gap is too large to be realistically filled by new construction in the short term,” the authors of the analysis wrote.
The pandemic forced many Americans to spend more time at home, possibly triggering demand for more spacious living arrangements and drawing more buyers into the housing market, according to the Fed, while lower interest rates likely further stimulated housing demand.
At the same time, inventory has fallen to historically low levels, driven in part by homeowners reluctant to list amid the outbreak, with generous mortgage forbearance programs and the foreclosure moratorium also likely squeezing supply, according to the Fed analysis.
By Tom Ozimek
Tom Ozimek has a broad background in journalism, deposit insurance, marketing and communications, and adult education. The best writing advice he’s ever heard is from Roy Peter Clark: ‘Hit your target’ and ‘leave the best for last.’