Home Prices and Short Inventory

Last year it looked as if home prices and short inventory just couldn’t get any worse. Prices were rising daily and the number of homes available were decreasing even faster. That turned out not to be the case. There are now even fewer units in inventory and the prices are still going up. When coupled with the increase in interest rates, buyers are feeling the squeeze.

This “perfect storm” has created a situation where buyers today see their buying power shrinking day by day. The increases in their monthly payments, along with taxes, insurance, HOA fees and inflation in general has become critical. According to the experts, the increase over last year is about 50%, driven primarily by increased interest on mortgages. With record inflation, many are unable to afford the homes they want and many are now waiting to shop.

As an example, the national average mortgage payment for a median priced home has increased by near $600 over 2021. The new median price is over $420,000 and interest rates are now over 5% for a 30 year mortgage. On top of these hurdles, there is an extreme shortage of homes being sold.  This spring is seeing over 50% fewer listings than in the same period last year. Bidding wars may have cooled a bit but not enough to offset the other increases.

If there is any good news, it may be that the inventory of homes for sale is slowly increasing in many of the major markets.