A low supply of homes, which escalated competition among buyers, helped push total home values by trillions of dollars in America, a new analysis by real estate platform Redfin showed.
The U.S. market saw houses add $2.4 trillion, a 5 percent jump in worth, bringing total value for homes to $47.5 trillion, the largest increase in nearly a year, Redfin said.
High mortgage rates has made homes expensive for buyers and stifled demand. On Wednesday, home loan applications for the week ending February 23 fell by nearly 6 percent as borrowing costs have risen above 7 percent over the last few weeks, lenders said.
“Higher rates in recent weeks have stalled activity,” Mike Fratantoni, Mortgage Bankers Association’s chief economist, said in a statement.
Purchase activity was low, Fratantoni said, although applications for the buying of new homes increased compared to a year ago.
“This disparity continues to highlight how the lack of existing inventory is the primary constraint to increases in purchase volume. However, mortgage rates above 7 percent sure don’t help,” he added.
A home is offered for sale on April 26, 2022, in Chicago, Illinois. Collective home values have risen by trillions compared to a year ago, according to real estate platform Redfin.
Scott Olson/Getty Images
Stifled supply is a key reason why home prices have jumped and heightened worth to properties, according to Redfin.
“America’s homeowners are sitting pretty. They’re holding a massive amount of housing wealth, despite lackluster demand from buyers, because home values skyrocketed during the pandemic and now a supply shortage is preventing those values from falling,” Redfin Economics Research Lead Chen Zhao said on the company website.
But buyers are seeing a market—with those jumps in value and elevated mortgage rates—that makes owning a home increasingly out of reach for them.
“Prospective buyers aren’t as lucky. The combination of elevated mortgage rates, high home prices and a limited pool of homes for sale means homeownership is about as unaffordable as ever,” Zhao said. “One bright spot for buyers is that mortgage rates should start declining before the end of 2024.”
Redfin pointed out that the average value of a home in December went up by about $17,000 to roughly $495,000 in December compared to the same time a year ago.
Newark and Camden, New Jersey, saw double-digit rises in value, helped by the shift in remote working, as people who work in New York City migrated to nearby states, able to secure more flexibility with their work. Similar dynamics could be seen in Milwaukee, Wisconsin, and Grand Rapids, Michigan, which saw homes gain nearly 10 percent in value.
But large metro areas like New York, New Orleans and Austin, Texas, saw some declines in value. These places share a common trait, according to Redfin.
“They’ve become unaffordable for many homebuyers, so home values no longer have much room, if any, to rise, because there’s a cap on demand,” Redfin pointed out.
Suburbs saw their homes gain more in value compared to urban areas, again partly due to the shift from cities by buyers during the COVID-19 pandemic.
“While cities have bounced back to some extent as employers have asked workers to return to the office, many Americans still work remotely, incentivizing homebuying and building in far-flung, affordable areas,” Redfin said.
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Source : Newsweek