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Why do home prices keep rising?

December 17th, 2021 | by: Steve Pollack | Posted in : Real Estate News, Economy, Real Estate Tips, Local News

Why do prices keep rising? Home prices in America are on an upward trajectory with no signs of slowing. Two separate indexes noted between an 11.2% and 12% increase in U.S. home prices year-over-year, or the fastest pace in 15 years. Economists warn the housing shortage will "continue to buoy house prices."

Several factors have created an extreme seller’s market and a lack of inventory in many areas.

  • Lagging construction starts due to slow entitlements and strict zoning laws,
  • Increased construction labor cost and materials costs (wood up 24% this year)
  • Second home buyers taking inventory (millennials with families; baby boomers who want second homes) have enter the market. This increases competition for primary and secondary home buyers which has driven up home prices.

Here are highlights from CoreLogic’s Data as featured in the WSJ:

  • Average Home Price Index growth Jan 2021 (11.2%) vs Jan 2020 (4.0%)
  • In January, the national home price index was 28% higher than the pre-Great Recession peak in July 2006. But, after adjusting for prices of all other goods, the national index was 3% above this level.
  • Overall, 16 cities had double-digit home price growth in January.