What's Up With Home Prices?

Home prices have risen sharply during the pandemic. Even before the pandemic started in early 2020, a housing supply shortage had been building for the last couple of decades. According to a report by the National Association of Realtors, the aftermath of the 2008 housing crisis has created an “under building gap of 5.5 to 6.8 million housing units across the entire country.” There are no clear solutions to this problem and it will only be exacerbated as demand for housing continues to increase.

We see two dynamics at play here contributing to this dire housing shortfall:

First, there is significant stress on the supply side. From a recent report by Freddie Mac's Chief Economist, Sam Khater, there has been a significant drop in the construction of entry-level single family homes over the last several decades according to Freddie Mac. In 1970, the number of homes coming online was about 418,000 per year. In 2020, the number of new homes coming online dropped to a meager 65,000 per year. That is a drop of 84% in new entry-level homes being made available to families.

Secondly, the pandemic has accelerated the migration of older millennials from inner cities to the suburbs. Millennials are now beginning to enter their prime family formation and home buying years. In 2020 alone, there were 2.38M first time home-buyers in the US. With the high availability of affordable debt and low interest rates, the housing market has become extraordinarily competitive, forcing families into bidding wars. Throw on there the proliferation of i-buyers and other institutional investors, most families are finding it impossible to find a home.

We are working on building a solution to give families a chance a homeownership against the backdrop of these looming macro-economic factors.

If you want to learn more, please reach out to us at hello@ascendhome.co.

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