Renters May Have to Keep Renting
The pace of U.S. home prices broke records in April.
Using an average of the S&P CoreLogic Case-Shiller National Home Price Index and Federal Housing Finance Agency tracking, the average price of a home surged 15.15% since April 2020.
According to the Wall Street Journal, home prices have surged this year due to demand from low mortgage-interest rates and a continued shortage of homes for sale. As many of our SFR rental-owning clients have experienced, houses today often generate multiple offers and sell above asking price. This phenomenon is reportedly national, affecting buyers and sellers in markets big and small.
For the 23rd straight month, Phoenix saw the fastest YOY home-price growth in the country, at 22.3%. followed by San Diego at 21.6%. Charlotte, N.C., Cleveland, Dallas, Denver and Seattle all recorded record-high annual price gains, according to the Wall Street Journal.
The supply/demand imbalance for houses is not likely to shift in the near future. Despite recent signals from the Fed of pending increases in interest rates, any changes will be slow and incremental. Moreover, the 2020 pause in new housing construction exacerbated an already-low supply.
The result is a goal line that keeps moving down the field. An aspiring first-time buyer with $55,000 of the required $60,000 saved to buy a $300,000 home last year now needs $69,000 to buy that same home at $345,000 this year. And by the time she saves another $14,000, the price may be even higher.
In the meantime, most renters may have to keep renting. Candidates for homeownership are likely to seek class-A apartment communities or single-family rental homes while waiting to buy. As the average waiting period to buy grows longer, demand for quality rental housing should continue to support rental rates. Of course, this assumes that the rental housing in question is located in markets with population growth, job growth and a reasonable pipeline of new supply.
In the pandemic economy, multifamily real estate held firm while sectors like hospitality and office suffered long-term setbacks. People will always need a roof over their heads, and for millions of hard-working Americans, that roof is likely to be atop an apartment building for years to come.
Source: Friedman, Nicole. “U.S. Home-Price Growth Rose to Record in April.” Wall Street Journal, June 29, 2021.
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