Rising real estate values and increasing rents have stretched budgets for homebuyers and renters since the onset of the COVID-19 pandemic. The median home sales price in the U.S. jumped by over $150,000 from the first quarter of 2020 to the fourth quarter of 2022 amid low interest rates and a stronger-than-expected pandemic economy. Rent prices, on the other hand, remained suppressed for much of 2020 with COVID-related renter protections and rental assistance programs in place, but accelerated in 2021 and into 2022.
Since the beginning of 2022, the U.S. Federal Reserve has raised interest rates in an effort to combat inflation throughout the economy. Between rising mortgage rates and the rapid run-up in home values, the residential real estate market has cooled down. As of Q2 2023, the median home sale price declined 13.2%—down from just over $479,000 in Q4 2022. But while a leveling-out in demand may have helped to slow down price growth, these measures cannot solve another fundamental challenge in the U.S. housing market: a major shortage of housing supply.
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