Home prices were already rising before the COVID-19 pandemic struck in early 2020, but with even greater demand and lower inventory over the past two years, the median existing house price has surged to over $350,000, according to The Washington Post. In just the past year, the price of a typical single-family home has jumped nearly 20 percent, but experts aren’t yet concerned that we’ve reached another housing bubble.
House prices have been supercharged by record low mortgage rates which are prone to fluctuations in the year to come, and low inventory levels could also improve as builders recruit more labor and ramp up construction in an effort to meet rising demand.
The script on house prices is still being written. The most graceful scenario is for prices to cool off, go more-or-less sideways, and allow incomes, rents and construction costs to catch up.
This seems likely if mortgage rates soon push modestly higher, weighing on housing demand and ultimately prices. While forecasting when rates will rise is an intrepid affair, it stands to reason they will rise as the pandemic recedes and the economy returns to full health, prompting the Federal Reserve to wind down its bond buying and increase short-term rates.
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