Homeowners nationwide have doubled their equity since 2009. While that’s good news for those who already own, prospective buyers say increases in home values—which lead to higher prices—are making it more difficult for them to break into homeownership.
Challenges to housing affordability will not be solved soon because of low inventory, says Lawrence Yun, chief economist for the National Association of REALTORS®. Yun noted during the National Association of Real Estate Editors conference in Denver last week that there’s a mismatch in many areas between what’s for sale and what households can truly afford. “Aside from feeling shut out of this wealth gain, nonowners are facing higher housing costs as rents continue to trend higher—or in some markets, skyrocket,” Yun writes in a recent column at Forbes.com.
Nationwide, rents have jumped 18 percent over the past five years while wage growth has edged up only 12 percent. Home prices have risen 5 percent to 7 percent annually. The silver lining is that mortgage rates have fallen back to around 4 percent, which has helped to somewhat preserve affordability this spring, Yun says.
“A majority of consumers are still indicating that now is a good time to buy a home,” Yun said during the NAREE panel. “Unfortunately, housing supply is too low, and prices keep going higher. These affordability challenges will likely remain into next year as long as inventory fails to pick up.”
Home sales have reached a decade high but could be even higher with more inventory, Yun says. He’s forecasting existing-home sales to be about 5.6 million this year, nearly 3 percent higher than 2016. He predicts that home prices will rise 5 percent this year.