Home prices up on surging demand

The housing market is booming and experts predict further growth in 2021 and continued record home price increases.

According to Forbes, surging buyer demand, lagging supply, the ongoing economic recovery, and low mortgage interest rates will continue to push home prices higher. Danielle Hale, the chief economist for realtor.com, notes that price growth will likely slow during 2021 as mortgage rates and continued price increases make homes less affordable for prospective buyers.

Even in COVID-19 hot spots, housing markets are sizzling. According to the Alexandria Echo Press, a Minnesota publication, home sales, and home values increased substantially in the hard-hit upper Midwest. Regional experts credit historically low-interest rates for the increases.

Some Americans also seek more space as work styles continue to be redefined. Remote work is the new norm for many, and according to ABC News, the change leads more people to seek out homes with more office space, bigger kitchens, and room for recreational activities.

The shine is at least temporarily off city condos, according to Crain’s Business as COVID-19 restrictions close down restaurants, parks, and entertainment. Violence in the cities earlier in 2019 has left many urban shopping areas boarded up, if not closed. Craig Lazzara, Managing Director at S&P Dow Jones Indices, told ABC News these factors have prompted buyers to move from urban condos to suburban homes.

According to Bloomberg, the competitive market and lean supply pushed home prices up for their biggest gain since 2014. The October S&P CoreLogic Case-Shiller index of property values, which measures home prices in 20 U.S. cities, showed property value increases of 7.95 percent from the same month the previous year. The same report showed that the cities that experienced the highest price gains were Phoenix, Seattle, and San Diego.

Price increases aren’t limited to the existing housing stock. New home construction is also competitive, as land becomes more valuable and the home construction industry faces higher costs, longer delivery times, and labor shortages due to the pandemic, according to Forbes.