In April, home prices increased about 5.5% from last year, according to the latest SP CoreLogic Case-Shiller results, and experts predict that increase will continue throughout this home-buying season.
While home prices increased, they slowed their pace from last year, but one expert says homebuyers shouldn’t expect relief anytime soon from the rising home prices.
“Home prices slowed slightly from last year, but homebuyers again face a challenging market as prices rose again from last month,” Trulia Senior Economist Cheryl Young said. “However, with mortgage rates relatively unchanged, expect relentless demand to continue through spring’s home-buying season despite chronically low inventory and escalating prices.”
One expert explained the reason for the rising home prices: high demand due to Millennials aging into homeownership, a booming labor market and growing wages, mixed with low housing inventory.
“Homebuilders aren’t matching historic building levels, and it’s unclear whether rising costs, burdensome regulations, a shortage of land to build on, a lack of construction financing or some combination of all these factors is to blame,” Zillow Chief Economist Svenja Gudell said. “A surge in the share of single-family homes being converted into rentals is keeping many homes off the market that otherwise may have traded hands every few years.”
Gudell explained there is no quick fix to the rising inventory concerns and increasing competition. And another expert agreed rising home prices will be slow to react to changes in market conditions.
“New construction has only recently begun to bring entry-level products into many markets and we expect it will take some time for this to have noticeable impact on market conditions,” Keller Williams Economist Ruben Gonzalez said. “Price gains are only likely to be subdued if we see a deterioration of demand as a result of rising interest rates at some point this year.”
However, one expert claimed just the opposite – saying there are several factors that could quickly turn the tide.
“Two conditions in today’s market that can quickly change the home-price trend are swings in the labor market or home inventory,” said Bill Banfield, Quicken Loans executive vice president. “Both of these factors have remained largely constant throughout the year, and we’re seeing this reflected in most metro areas of the housing market.”