(KTLA) – Supply and demand – it always explains why prices can get so high. The housing market is no exception.
Home prices continued climbing in January as inventory of available properties fell to a record low, the National Association of Realtors reported. The nationwide median price for a home last month rose by 15.4% to $350,300 from a year ago.
“The increasing prices are indicative of a seller’s market, with an abundance of eager buyers and very limited supply,” said Lawrence Yun, the association’s chief economist.
The inventory of available homes fell to an all-time low of 860,000 at the end of January — the lowest level since 1999. This means if the current sales pace continues, the available supply of homes would be exhausted in less than two months.
That’s obviously great for sellers, but decidedly grim news for buyers, especially first-time home buyers trying to get a toehold in an increasingly competitive market.
More properties are currently available at the higher end of the economic spectrum — not the pool that younger home buyers typically splash in. According to the Realtors association, homes priced at $500,000 or less are rapidly vanishing, causing bidding wars for the relatively few options available.
Meanwhile, interest rates are rising and are poised to jump higher as the Federal Reserve prepares to unleash a series of rate hikes aimed at curbing inflation.
This creates another problem. As younger people are priced out of the home-buying market, they often have no choice but to remain renters. That creates a whole other supply-and-demand issue.
Greater demand for rental properties, especially in tight markets, pushes rents up. The real estate firm Redfin says rents in America’s 50 largest cities rose by 14% last year to an average $1,877 a month.
“Rising mortgage costs push more potential homebuyers into renting instead, which pushes up demand and prices for rentals,” said Daryl Fairweather, Redfin’s chief economist.
“Mortgage rate increases are accelerating, which will cause both mortgage payments and rent to grow throughout 2022,” he said.
Short of moving to a cheaper, less attractive locale, there’s not much you can do about this, at least until the housing market finally starts to cool off. In the meantime, this is just another pricey thing to add to your growing list of pricey things.