Strong buyer demand this spring is pushing home prices up at double the rate of increase in income growth, The Wall Street Journal reports. The median price of an existing home for all housing types was $236,400 in March, up 6.8 percent from a year ago, when it was $221,400, according to the National Association of REALTORS®. Incomes, meanwhile, increased 3 percent in February from a year earlier, according to the Labor Department.
“Bolstered by strong consumer confidence and underlying demand, home sales are up convincingly from a year ago nationally and in all four major regions, despite the fact that buying a home has gotten more expensive over the past year,” says NAR chief economist Lawrence Yun.
Home prices are nearly 40 percent above where they were at the bottom of the housing crash in February 2012, according to the S&P CoreLogic Case-Shiller U.S. National Home Price Index. Some markets are seeing even more increases. In Dallas, home prices have surged nearly 53 percent from their low and are now 35.5 percent above their previous high. In Denver, home prices are 59 percent above their low and are 36.5 percent above their previous high.
“It can’t be sustained,” warns David Berson, chief economist at Nationwide Insurance and a former economist at Fannie Mae. “It can’t go on forever.”
The shortage of homes for sale has led to higher prices, economists say. Inventory in March was 6.6 percent lower than a year ago, according to NAR. Further, the level of home construction relative to the number of U.S. households is at its lowest level since the Census Bureau began tracking such data in 1957, according to the Federal Reserve Bank of Kansas City.
“Sellers are in the driver’s seat this spring as the intense competition for the few homes for sale is forcing many buyers to be aggressive in their offers,” Yun says. “Buyers are showing resiliency given the challenging conditions. However, at some point—and the sooner the better—price growth must ease to a healthier rate. Otherwise, sales could slow if affordability conditions worsen.”