Home prices in the U.S. continue to rise far in excess of inflation as demographic and supply factors work to limit availability even as a stable job market and low mortgage rates facilitate demand.
The Federal Housing Finance Agency (FHFA) reported a 6.6 percent annual rise in the second quarter, and a 1.6 percent gain from the previous three months. In June prices saw a 0.1 percent increase, less than the 0.5 percent median estimate.
The number of previously occupied homes for sale, the largest category of U.S. housing purchases, is consistently shrinking. It was 7.1 percent lower in June from the prior year, the 25th month in a row that the housing inventory has declined according to the National Association of Realtors.
Two main factor are keeping the U.S. home supply tight. Construction of new homes, especially single-family units, has been 25 percent below the historical average since the boom and crash of the last decade.
This year housing starts have averaged 1.2 million annually and that is near the high-point of the past nine years. In comparison in the 50 years from 1959 through 2009, U.S. builders put up an average of 1.5 million new homes each year. The disparity is even greater when the increase in U.S. population is taken into account.
An additional factor is the declining mobility of the U.S. population. As the post-war baby boom generation, the largest in U.S. history, ages and retires, many of its members are choosing to stay in their homes rather than selling and seeking smaller accommodations.
New home buyer are thus forced to compete in the more expensive existing home market rather purchasing relatively smaller and cheaper new construction.
.“New-home sales are climbing but, relative to the overall population, they still remain low from a historical perspective. The tight inventory is a major explanation for why house prices have been increasing every quarter over the last six years.” said William Doerner, senior economist at FHFA, in the statement accompanying the report.
The FHFA index tracks purchases for single-family homes financed with mortgages owned or securitized by Fannie Mae and Freddie Mac the government owned mortgage giants...
The median price of an existing single-family home was $255,600 in the second quarter, 6.2 percent higher than a year prior, according to information from the national Association of Realtors. .
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