January 24, 2022
House prices rose almost 20% in 2021. What can we expect this year?
Many buyers know about bidding wars. They were common last year. So, it’s not surprising to see a new record 19.8% increase in home prices between Aug. 2020-Aug. 2021. There’s been a slight slowdown though – from Sept. 2020-Sept. 2021, prices rose only 19.5%!
Kidding aside, these rises are incredible. The average American home price is more than $400,000 for the first time. In the third quarter, the median home price came in at $404,700:
Goldman Sachs and others think home prices will rise another 15% or more over the next year. These huge, continuous rises seem to defy reason. Still, low inventories, pandemic-induced building slowdowns, and older Americans opting to stay in their homes are all contributing to the rise.
Many homes are selling at huge premiums relative to their asking prices. In most years before the pandemic, the percentage of homes selling above asking was reported to be about 20-25%, depending on the time of year. But six months ago in June 2021, 56.4% of homes sold above listing price.
That number has since come down, but the bottom line is supply and demand still rule markets over the long haul, even the U.S. housing market. Bull markets eventually end, but this housing boom looks like it still has some room to run. Perhaps rising interest rates may curb the growth, should they come to fruition, but that remains to be seen.
Until then, it looks like a sellers’ market and buyers need to be ready to pay.