Single-family home prices have surged over the past year, with the median sale price climbing nearly 25% nationwide.
The surge in prices reflects both the impact of the pandemic and low interest rates. It also reflects the changing demographics as well as the current significant housing shortage.
Indications are that the housing shortage will continue for some time to come.
Why?
There are approximately 72 million millenials between the ages of 24 and 40. The median age of first-time home buyers is 33 years old. Over the next 5 years approximately 4.5 million millenials will turn 33 each year. Economists predict that this number will create a demand for approximately 4 million new households over the next two years, putting a lot of pressure on housing.
Although home construction has increased steadily over the past year, it doesn't appear to be enough to combat the shortage. In 2020 new home construction was at it's highest level in 13 years, at approximately 900,000 new homes. An estimated 1.1 million new houses are forecasted to be built in 2021.
Apartment construction has been at record levels, adding an average of 300,000 units per year for the last 5 years, but we still face a housing shortage.
There will be 4.6 million millenials turning 33 in 2021, creating an estimated 1.9 million new households. If 1.1 million new homes are built, and 330,000 new apartment units are constructed, it implies a shortfall of approximately 500,000 housing units.
These factors point to the housing market remaining tight.
