After a tumultuous rise in home prices during the COVID-19 pandemic, today’s housing market has finally started showing signs of cooling off. From February 2020 to April 2022, the median home sale price increased from $304,000 to a peak of $410,000. That means in just over two years, the median home sale price increased nearly 35%. For perspective, it took nearly five years prior to that point to see a similar percentage gain in median home sale prices.
This rapid rise is reversing, just much more slowly: from April 2022 to December 2022, the median home sale price stayed relatively flat, declining from $410,000 to $405,000. While a deceleration in home sale price growth is certainly relieving to those looking to buy, home prices are still roughly 33% more expensive than they were pre-pandemic. And unless home listings experience an extreme price correction, climbing interest rates may continue to keep home prices out of reach for many. As of February 2023, the federal funds effective rate was 4.58%, the highest it’s been since prior to the Great Recession.
Further, despite a federal government initiative aimed at increasing the number of homes available, there’s been a reduction in residential construction spending over the last few months that’s poised to make the problem of limited housing inventory even worse. The seasonally-adjusted annual rate of residential construction spending increased by $641 billion from April 2012 to May 2022, after adjusting for inflation and seasonality, but that number is currently trending down. Between May 2022 and November 2022, annual spending decreased by $97 billion, which means less money is currently being allocated towards new housing inventory.
|
Read the full article here
