Housing prices surged during the pandemic and currently show little signs of slowing as the mismatch between supply and demand continues to support prices. It is estimated that the nation needs 5.5 million more homes to bring supply and demand into balance. Naturally, it takes months, if not years, for new housing inventory to hit the market, which means the strong housing market fundamentals that have supported prices may continue for some time.
According to the National Association of Realtors, the median sales price for existing homes increased 24% year-over-year to reach a new high of more than $350,000. Originally, the surge in housing demand was attributed to the work-from-home trend that allowed people to relocate and work from anywhere. In addition, being cooped up during the pandemic caused many people to explore for more space, leading some renters to seek to buy, while at the same time some homeowners looked to upgrade to homes with more space or a larger yard.
However, these potential buyers were met with a market that had very little inventory available. Even as prices increased by nearly a quarter in the past year, the number of existing homes listed for sale has declined for four consecutive months. This is a market where people who already have a home are largely staying put, which is forcing new home buyers to bid up home prices. Naturally, all markets are self-balancing over time as high prices will encourage homebuilders to build more inventory, but in the short-term, prices may continue to trend upward if demand remains strong.