The housing market is on fire, with a supply shortage driving prices to record highs. But alternative signals show the market isn’t just tight, it’s challenging in much more fundamental ways. Here are the five structural shifts that are fueling the red-hot US housing market.
1. Housing Shortage
While trends are similar to the mid-2000s bubble, it is a nationwide supply shortage driving prices higher, and not risky lending practices.
2. Relocating to Cheaper Locales
Americans largely fled densely populated cities for suburbs and traded their apartments for homes while mortgage rates were low.
3. High Constructions Costs
Surging lumber costs cut into builders’ efforts, prices soared to record highs earlier in May and closed 280% higher y-o-y.
4. Stronger Home Inflation
Home-price inflation will stay hot into 2023, and with selling prices already elevated, a long rally could further dent home affordability across the US.
5. Space and Value Prioritized
Around 66% of people who moved during the pandemic bought a unit that was the same size or larger than their previous home.