CHICAGO (NewsNation Now) — You’ve probably have heard that it’s a tricky time to buy a home right now. That’s certainly true.
According to a report by the National Association of Realtors, only 250,000 affordable homes are on the market right now. And those homes are only affordable to families with an annual income of $75,000 to $100,000. That’s a sharp decline from the roughly 656,000 affordable homes available before the pandemic.
Experts say many factors are responsible for astronomical prices on housing, including a nationwide housing shortage and extremely low rental vacancies. However, Zillow senior economist Jeff Tucker says he doesn’t think there will be a slowdown anytime soon.
“This is a really difficult housing market right now,” Tucker said Wednesday as a guest of “On Balance.” Whether you’re looking to go buy your first home, or if you’re renting a home right now, there are not many affordable options out there.”
During the pandemic, the housing market boomed with low mortgage rates and decreased inventory, which motivated buyers to scoop up homes as soon as they were listed.
Relocation and additional space were also determining factors for prospective homebuyers, Tucker said.
“People really research and went to the places that were traditionally those kinds of bastions of the American Dream … where you could go buy a family-sized home for an affordable price.”
According to the S&P Case-Shiller Index, home prices shot up nearly 19% compared to last year, but that’s not all. At least 500 cities in the U.S. now have an average home price of $1 million.
“Rising interest rates are going to create headwind for demand for housing this year,” Tucker said. “People getting a 30-year mortgage right now are already getting rates quoted above 4% … when people (were) getting two and a half or two and three quarters percent a little over a year ago. So that is absolutely eating into homebuyers’ budgets.”
Millennials are also having a big impact on the crowded market. In a recent study from Zillow, about half of all buyers are younger than 36, and about half of the sellers are younger than 41. However, Tucker said in many cases, people are finding that homes simply aren’t available.
“The homebuilding industry hung up their hammers, stopped building homes in the wake of the 2007 to 2008 housing crash. So we really under-built homes for at least 12 or 13 years … And that came at a terrible time because we have this wave of demand coming from millennials. There are several million extra people right around age 30 to 35,” many of them looking for homes.
Meanwhile, the number of homes for sale has been at a record low, contributing to ballooning home prices that have caused many higher-income households to remain renters, further upping demand.
“But frankly, for a lot of homebuyers, what that will mean is, ‘OK, I’m going to look for a more affordable (home) in a more affordable neighborhood, or maybe move to a more affordable city entirely so that I can make it work.”
Nationally, Tucker said he expects home prices to continue rising this year.