The American real estate prices were already increasing to a competitive level, skyrocketing amidst a pandemic situation. The median sales price of existing homes in the US in March 2021 jumped to $329,100, a 17.2% increase compared to last year.
“Everybody expected housing to sort of dry up with the rest of economy, but the opposite has happened,” says Jerry Howard, CEO of National Association of Home Builders.
Several Factors Are Causing This High Price Of American Real Estate.
1) Super-low mortgage rates
Mortgage rates are at a record low level, which had lead to high demand for housing, resulting in a record-high price hike of real estate.
2) Fewer houses for sale
April 2021 witnessed 1.6 million US homes available for sale, 20.5% down from the year earlier. This situation led to a median house price increase of 19%, yielding $341,600.
Metro areas of the US, namely Rochester, New York, Grand Rapids, Michigan, Dayton, Ohio, have reported lower house sales, down by 9%- 7%. In these regions, house inventory has crashed approximately 30%. The drop in sales has further lead to home price hikes in these areas.
3) High migration
Another reason is the migration of people to other states like Boise, Reno, Dallas, Phoenix, Vegas, Austin, Florida etc.
As California already has sky-high real estate prices, the Californian people migrating to other states are bringing those prices with them.
Hence, the real estate prices of other states are also reaching the Californian level.
4) Soaring lumber prices
As stated by the National Association of Home Builders, the increase in lumber prices adds $36,000 to the cost of the new home. Many home builders defer their construction projects because of the sudden tripling of lumber prices. This leads to delays in home construction which the country badly needs. And hence the costs of existing properties are skyrocketing.
5) The land prices are at their peak
Lands on which houses were built in April 2021, the single lot price is 11% higher than last year. The hike in land costs, labour, and building materials has also resulted in a higher price of real estate across various American states.
High-Income Families Are Contributing To Price Hike Greatly
New norms of work-from-home inspire high-income families to shop for the best real estate options (including sunny and spacious homes). They are bidding up prices (more than the market prices) for the areas and the property they like.