July Home Prices Were Up 19.2% Year Over Year
by Maurie Backman | Published on Sept. 30, 2021
Higher home values have left buyers struggling to purchase properties.
It's not exactly news that today's housing market is a tough one to tackle. Not only is real estate inventory extremely limited, but home prices have gotten so high that many buyers are struggling to find properties that work for their budgets.
In July, home prices rose 1.4% from the previous month, as per the latest Federal Housing Finance Agency House Price Index. But what's more notable is that home prices also soared 19.2% compared to July of 2020. And based on that figure alone, it's easy to see why so many people can't afford to buy a home at this point.
When will home prices come down?
A big reason home prices are so inflated right now is that there's not enough inventory to go around. It's estimated that the U.S. housing market is short more than 5 million homes needed to keep up with buyer demand. And until more properties hit the market, home values are likely to remain high due to the basic laws of supply and demand. Any time there's not enough of a given commodity, its price has the potential to skyrocket.
Of course, that invites a deeper question -- why are there so few homes available for sale? For the past year and change, inventory has been sluggish, and much of that has been chalked up to sellers not wanting to list their homes during a pandemic and economic crisis.
Now at this point, the economy is in better shape than it was a year ago. The national unemployment rate is down and more job opportunities abound. But sellers may still be uncomfortable with the idea of changing their physical or financial circumstances at a time when there's still a pandemic raging, which could explain why housing inventory remains limited.
Another thing is that construction materials have been difficult to come by this year, given that the pandemic has disrupted many supply chains. The result? Construction isn't moving at a fast pace, so not enough newly-built homes are hitting the market to alleviate the inventory crunch.
Should you postpone your home-buying plans?
At this point, it's unlikely that housing inventory will pick up substantially this year. So if you've been struggling to find an affordable place to buy so far, you may want to consider pausing your home search and waiting until the spring of 2022.
Generally, spring is a popular time to list homes, and in six months from now, we may be in better shape with regard to both the pandemic and the economy (or at least we can hope). Since mortgage rates are likely to stay low well into next year, waiting to buy could spare you from having to pay a premium for a place to call your own.
Of course, there's no guarantee that real estate inventory will pick up in six months or so from now. But what we do know is that there aren't enough available homes to buy right now and that buyers who purchase property today are likely to pay a bundle and take on higher mortgages than usual. If your living situation is stable and you're in a position to wait things out, it could really work to your benefit to sit tight.
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