(KTLA) – Supply and demand – this always explains why prices can get so high. The housing market is no exception.
Home prices continued to climb in January as the inventory of available properties fell to a record low, the National Association of Realtors reported. The national median price of a home last month rose 15.4% to $350,300 from a year ago.
“Rising 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 stock of available homes fell to a historic low of 860,000 at the end of January – the lowest level since 1999.
This means that if the current pace of sales continues, the supply of available homes will be exhausted in less than two months.
This is obviously great news for sellers, but bad news for buyers, especially first-time homebuyers trying to gain a foothold in an increasingly competitive market.
More properties are currently available at the higher end of the economic spectrum – not the pool young homebuyers typically splash into. Homes priced at $500,000 or less are quickly disappearing, sparking bidding wars for the relatively few options available, according to the Realtors Association. .
Meanwhile, interest rates are rising and are poised to rise as the Federal Reserve prepares to trigger a series of rate hikes aimed at curbing inflation.
This creates another problem. As young people are excluded from the home buying market, they often have no choice but to stay as tenants. This creates a whole other supply and demand problem.
Increased demand for rental properties, especially in tight markets, is driving up rents. Real estate firm Redfin says rents in the 50 largest US cities rose 14% last year to an average of $1,877 per month.
“Rising mortgage costs are pushing more potential buyers to rent, driving up demand and prices for rentals,” said Daryl Fairweather, chief economist at Redfin.
“Mortgage rate increases are accelerating, which will lead to higher mortgage payments and rents throughout 2022,” he said.
Short of moving somewhere less expensive and less attractive, there’s not much you can do about it, at least until the housing market finally starts to calm down. In the meantime, it’s just another expensive thing to add to your growing list of expensive things.