As home prices continue to rise, some experts are concerned that the growth is too much for many potential buyers and will force them to rent, according to the latest report from CoreLogic. Prices are showing no signs of slowing either, keeping affordability is at its lowest in 10 years.
- Home prices were up 6.2% year-over-year in October
- Forecasts show prices rising another 4.1% by the end of 2018
- Price growth could lock potential buyers out of the market, forcing them to rent
The National Home Price Index just surpassed its pre-recession peak and price growth shows no sign of slowing down. “Home prices continue their climb supported by low inventories and increasing sales,” said David Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices. “Nationally, home prices are up 6.2% in the 12 months to October, three times the rate of inflation.”
High prices have also been dragging inventory and sales down all year long. Sales rebounded in November, but the jump is likely temporary as inventory remains desperately low. “Inventories measured by months-supply of homes for sale dropped from the tight level of 4.2 months last summer to only 3.4 months in November,” Blitzer said.
“Underlying the rising prices for both new and existing homes are low-interest rates, low unemployment, and continuing economic growth,” Blitzer added. “Some of these favorable factors may shift in 2018. The Fed is widely expected to raise the Fed funds rate three more times to reach 2% by the end of the New Year.”
The culmination of high prices, high demand, and low inventory have put the housing market in a tough spot. Housing affordability is at its lowest in 10 years, according to ATTOM Data Solution’s Home Affordability Index.
“The last few months of 2017 have clearly demonstrated the extent to which the housing market refuses to be knocked off its stride,” Zillow Senior Economist Aaron Terrazas said. “Whether and how long the housing market can continue to defy gravity, and whether the good times last into 2018, remain open questions. But for now, the fundamentals driving the market today look unlikely to change anytime soon.”