homePrices

First Time Buyers and Rising Home Prices

By: Jorge Lopez, April 27, 2016

Does it seem rather odd that even with mortgage rates at some of the lowest they’ve ever been, many prospective buyers are being priced out of the market?  The culprit behind it may be the shortage of housing inventory, forcing a consistent rise in home prices.  Per the S&P/Case-Shiller index, home prices across twenty major cities have jumped by over five percent compared to 2015, roughly two and a half times faster than the inflation rate.

While the increases have been largely consistent, the pace of these increases has dropped a bit, though variations across the United States tend to be significant.  Take for example the Pacific Northwest where prices in cities such as Portland and Seattle have skyrocketed by more than ten percent.

Homeowners choosing not to put their homes on the market is also a factor in the housing supply shortage problem.  Just a couple of decades ago, there was about an eight to nine month supply, but nowadays it’s more along the lines of five months, resulting in slower sales and higher prices.

Other factors that may also be contributing to the lack of first time home buyers is the rise in the amount of student loan debt and the fact that marriage and parenthood is becoming less of a priority among younger people.

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