The recent surge in home prices across the United States is largely attributed to the shortage of housing supply failing to meet the high demand in the current market. According to Lawrence Yun, the Chief Economist of the National Association of Realtors (NAR), the increasing prices in 93% of the 223 major metro areas examined by NAR in the first quarter of 2024 can be attributed to the lack of sufficient housing supply. This trend is seen in 10 metro areas, including Fond du Lac, Wisconsin, Rockford, Illinois, and the Greater New York area, where prices have risen by up to 23%. The surge in prices follows a decrease of 2.86% year over year as of April 2023. Despite the increase, the median home price in the US is still $389,400, as of April 2024. The significant price hike in Fond du Lac, Wisconsin, has not deterred potential buyers, as the city offers more affordable homes compared to nearby major cities. Similarly, Illinois cities such as Peoria, Rockford, and Bloomington provide relatively cheaper homes and ample space compared to Chicago. The northeastern region witnessed an 11% increase in single-family home prices in the first quarter of 2024, representing the highest regional growth in the country. The growing demand for housing coupled with lower mortgage rates close to 6.6% after reaching 7.79% in November 2022 has contributed to the surge in home prices.
Related articles suggest that the Federal Reserve may cut interest rates twice by the end of 2024 due to the anticipated disinflation progress, with the April Consumer Price Index expected to show a decrease in auto insurance’s effect on prices. The “Buy in May” trade is still active, and stock prices are predicted to rise as investors begin pricing in additional interest rate cuts from the Federal Reserve. Additionally, some homebuilders, such as D.R. Horton and LGI Homes, have resorted to providing incentives, reducing home prices, and constructing smaller houses to address affordability issues for homebuyers.
Moreover, the Association of Older Americans (AOA) reports that while most adults aged 50 and above prefer to remain in their homes for as long as possible, the rising housing costs and dwindling supply have made it challenging for them to move. A similar situation is affecting lower-income individuals, as companies such as McDonald’s are finding it difficult to retain clients due to higher prices. The Bureau of Labor Statistics revealed that menu prices went up by 5% year over year, while full-service menu prices rose by 3.2%. Grocery prices also increased by 1.2% during the same period.
Redfin, an online real estate brokerage, revealed that its 1,658 lead agents represented 0.77% of all homes sold across the U.S. During the first quarter of 2024. Although the number of agents has decreased over the last couple of years, it remains significantly higher than the 3 million licensed Realtors in the U.S.
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