Home prices continue to skyrocket across the U.S. Gains in 20 U.S. cities accelerated in August while housing inventory remains tight, according to figures from S&P CoreLogic Case-Shiller released Tuesday.
The problem is classic supply and demand: There are too few homes and too many buyers, driving the prices up. Asking prices have grown faster than incomes, reducing homeownership rates across the country. First-time homebuyers are particularly feeling the pinch, as prices rise faster than their incomes. As they attempt to save up to afford a house, the price continues to rise, making every day they’re out of the market another loss.
A separate report showed that those looking to purchase their first house, specifically looking at previously owned homes, was at the lowest rate in two years during September.
In places affected by hurricanes like Texas and Florida, we may see a further increase in home prices as the housing supply was damaged by the storms.
Of the cities with the highest year-over-year price appreciation, Seattle ranked first (13.2%), then Las Vegas (8.6%), with San Diego rounding out the top three (7.8%). San Diego gained the highest month-over-month appreciation with a whole percentage-point climb. Atlanta was the only city to register a decline with 0.2%.
“Home-price increases appear to be unstoppable,” David Blitzer, chairman of the S&P index committee, said in a statement. “Measures of affordability are beginning to slide, indicating that the pool of buyers is shrinking,” and the Fed’s interest-rate hikes are likely to push mortgage rates higher over time, “removing a key factor supporting rising home prices.”
To make matters worse, data shows that where housing prices climb, employment growth goes down. A Bloomberg piece discussed how, in the U.S.’s most expensive and unaffordable cities like San Diego and San Francisco, employment growth was tapering off to below national averages after enjoying years of high employment generation. Meanwhile, Dallas, a far more affordable city, has seen a slight slowdown, but nothing like the job curtailing in the more expensive parts of America.
“Job Growth Slows Where Housing Costs a Lot,” Bloomberg, October 31, 2017.
“Home-Price Gains in 20 Cities Picked Up in August,” Bloomberg, October 31, 2017.