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How Housing Trends Affect Rental Real Estate

Sep 1

Prices continue to rise despite the current shortage of inventory, and rents remain high. These trends are the result of a number of factors. In this article, we'll take a look at some of the recent housing trends and how they might affect you. In particular, we'll explore how tight inventory is contributing to soaring prices.

Prices continue to rise

Young family enjoys their new home in Oceanside, CA
Young Family in Their Oceanside Home (Pexels)

 

According to recent data, prices have continued to increase in the United States. In fact, the median price of a home is now at its highest level since 2006. For the last 5 years, real estate market has been strong with buyer demand surpassing supply. As the result, the average price of a home has risen. While the reasons for price changes are often unclear, general trends can be used to determine how to influence housing prices.

In June, the number of home sales declined 14.2% from a year ago. The drop in sales was the largest monthly decrease since June 2012. Annually, home sales have declined for 13 straight months. Rising mortgage rates are also limiting supply, a factor that drives prices higher. Rising interest rates are also hampering housing construction, which tends to be highly responsive to interest rate fluctuations. As a result, residential construction has slowed in recent months.

Home prices continued to increase in June, reaching a new record high. In June, the median price of existing homes was $416,000, up 13.4% from a year ago. The trend is likely to continue for the foreseeable future. In fact, according to recent data from the MBA, home prices are expected to rise another 13.4% year-over-year, and there is a chance of an even bigger increase in housing prices next year.

Demand remains strong

Housing demand is expected to remain strong in the next few years, despite the slowdown. According to recent statistics, home sales in April were up 12% year-over-year, following months in which growth topped 30%. The cumulative number of homes sold in the last 12 months has reached 606,000, the highest total since August 2008. Rising housing prices, improved employment figures, and favourable financing conditions have all contributed to this trend.

A recent RIWI survey indicates that the demand for housing has remained strong, even if prices are higher than they were a year ago. The survey does not consider the higher-end properties, such as mansions, condos, and villas. It measures the prices of units for sale posted in real estate agents' offices. Using these prices, buyers can get an idea of how much their own apartment will cost.

Demand for housing is high, as the economy remains stable and demographics are improving. In addition, Wall Street is still buying houses, which helps keep a floor under price appreciation. In this way, the housing market will be less affected by a recession. However, the supply of homes for sale remains low, and a lack of new housing supply means that prices are likely to stay high.

Although the housing market in the United States continues to suffer from a shortage of homes, demand is still strong and the number of homebuyers is growing. This lack of supply is not an indication that the country is in a housing crisis. In fact, the shortage of housing has accelerated the demand for homes. As a result, the housing market will remain tight until 2022.

Inventory shortages continue to drive up prices

According to the Zillow weekly housing report, the housing market continues to see inventory shortages. With fewer homes on the market, there are fewer potential buyers. That means more sellers. But the supply of homes is not keeping up with the demand, which keeps prices high. In fact, according to the mortgage technology and data provider Black Knight, home prices are now less affordable in 95% of U.S. markets than they were a year ago.

Many people in the U.S. are struggling to find a place to live. The low inventory is affecting communities all across the country. This shortage caused builders to stop building new homes and lumberyards to stop producing them. As a result, building materials and supplies became scarce and extremely expensive. Additionally, home prices rose, causing existing homeowners to stay put.

Despite these problems, many buyers are still trying to lock in mortgages before interest rates continue to rise. But the shortage of available housing is making the sellers' market worse, as realtors are reporting. "Inventory shortages are a major problem," says Devyn Bachman, vice president of research at John Burns Real Estate Consulting.

The number of homes for sale dropped by 26 percent in January 2021, and there is now a 1.9-month supply. In addition to a lack of available houses, current homeowners are hesitant to open their doors to buyers, which has resulted in a tight housing market. Low supply means increased competition, so buyers are willing to pay more to win a bidding war. Moreover, these shortages are affecting households across the income spectrum.

Rents remain high

The housing market continues to struggle to meet demand, and rents have kept rising along with prices. Last month, Redfin reported that the median monthly rent in the United States was over $2,000. That's a 15.2 percent increase over last year. Many cities have experienced double-digit rent increases in recent months. This has strained the budgets of renters as well as buyers.

This rise in rents has a number of reasons. First, the economy is struggling, which has caused rents to rise. The second reason is a shortage of housing. Land and building materials are in short supply, and this has pushed up rent prices. As a result, the cost of renting is higher than the cost of owning the property.

In Manhattan, the median rent increased to $4000 in April. At the same time, the vacancy rate dipped to an all-time low. In the outer boroughs, rent increased in only four neighborhoods: Throgs Neck/Co-op City, Brooklyn's Rockaway/Broad Channel, and Bushwick.

While rising rents are a problem, they are not the cause of rising inflation. The government can act on the affordability crisis by suspending gas taxes or by offering cash rebates to car owners. However, the short-term policy options available are limited. The government cannot simply wave a magic wand and build more homes, which would only increase the cost of living.

Millennials aren't interested in investing in a home

Millennials aren't interested in buying houses any more than previous generations, according to recent surveys. There are several reasons for this, and they aren't equally applicable to different areas of the country. For investors in rental real estate, however, this trend has important implications.

One of the biggest problems millennials face is affordability. Many cities have sky-high prices, making home ownership impossible for most millennials. A study by Apartment List, an online rental marketplace, showed that it would take millennials ten years to save enough money to purchase a 20% down payment for a home.

The study also found that two-thirds of Millennials had not yet reached the median age for first-time homebuyers - 31. These young adults are also starting families much earlier than previous generations. In 2014, the average age for first childbirth was 26.3 years, two years earlier than in 1994.

Despite the low homeownership rates, millennials are now the largest generation in the U.S., and are projected to surpass the baby boomers as the largest living group in the country. Despite these statistics, economists expect that demand for housing will remain strong for the foreseeable future.

In addition, millennials are increasingly worried about their future home buying decisions. They are concerned that the housing market may not recover completely from the 2008 global financial crash. They are also concerned about the potential of another housing bubble, which discourages many of them from investing in properties. Even if the housing market is stable, many millennials are not able to afford to buy a home.

Supply chain issues

Supply chain issues in housing trends are affecting home sales, but it's not just new home buyers who are experiencing difficulty. Fixer-upper buyers are also suffering from delays in sourcing materials and contractors. It can take months to replace an appliance, for example. According to Ali Wolf, chief economist for the building consultancy Zonda, 91% of home building companies are experiencing supply chain problems.

These supply chain issues are compounding the housing shortage that has plagued the housing market for years. The active inventory was at an all-time low by mid-summer, causing price growth. In some areas, prices went up as much as 19 percent a month. This trend has affected households across the income spectrum.

The shortage of building materials and labor led to a rise in prices. This created a seller's market, meaning that buyers had to compete with each other to get a home. In addition, mortgage rates are higher than ever, increasing the competition for a home. This creates perfect opportunity for sellers to maximize value of their homes.

Rising mortgage rates could help ease the housing shortage, but they could also delay the home buying process.

These supply chain issues will continue through 2022. According to U.S. Census Bureau figures, the pace of new residential construction hit a five-month low in April. Single-family home construction also slowed. Despite this, home prices rose 15.5% year-over-year to $424,405.