Two simultaneous trends are making it increasingly difficult to buy a home in the U.S., according to a new report just released by Harvard University.
The number of actual houses on the market this year has fallen by a significant 37% since 2019. That means that roughly only around 870,000 homes as of early this year were available for sale.
That’s the lowest total in four decades, says Harvard’s Joint Center for Housing Studies.
But the decline in houses is coming at the exact time that the market is witnessing a historic increase in prices, encompassing an overall 13% rise in the last year, with some particularly popular areas of the country showing a price rise of up to 20%.
According to the State of the Nation’s Housing 2021, “inventories of existing homes for sale were already low heading into 2020, and the pandemic made matters worse by discouraging sellers from putting their homes on the market.”
While the country has seen home price increases before, continues the report, this boom is unique in terms of credit availability. The interest rate on a 30-year fixed mortgage was down to 3.0% early last year, and then fell below even that low number last summer.
“Low interest rates and rapidly rising prices have, in turn, given a substantial boost to new residential construction,” continues the report. “Single-family housing starts hit 1.0 million units at a seasonably adjusted rate in August 2020 and continued to exceed that pace through the first quarter of 2021.”
Should this pace continue, predicts the report, 2021 will mark the first year that “single-family starts have topped the one million mark since 2007.”
But in a cautionary note, the report contends that “new construction can only do so much to ease short-term supply constraints.” To meet the continuing market demand, “more existing single-family homes must come on the market.”
By Garry Boulard
