Home prices in the U.S. have skyrocketed as a shortage of homes for sale has been fueling bidding wars — a good thing for sellers but not so much for buyers.
The housing market has been a bright spot through most of the COVID-19 pandemic, as other parts of the economy like leisure and travel suffered. Historically low interest rates in 2020, pent-up demand for bigger homes (as millions of Americans began working from home full-time), and record low inventory (even prior to the pandemic) have elevated sales activity.
“From what I’m seeing the buyers are panicked, depressed for good reason. Most people are forced to spend a lot more on the house than they would,” Barbara Corcoran, residential real estate industry veteran and "Shark Tank" star, told Yahoo Finance Live this week.
Corcoran said she couldn’t remember a time when prices have gone up at the pace she is currently seeing. “Prices are up in the last 12 months,” she said.
The median existing-home price in February was $313,000, up 15.8% from February 2020, according to the National Association of Realtors (NAR). Home prices are growing at a record pace. The most recent S&P CoreLogic Case-Shiller national home price index posted a 11.2% annual gain in January, up from 10.4% in December — reaching its highest recorded level since February 2006.
“Homebuyers are experiencing the most competitive housing market we’ve seen since the Great Recession,” said Frank Martell, president and CEO of CoreLogic, in a recent press statement. “Rising mortgage rates and severe supply constraints are pushing already-overheated home prices out of reach for some prospective buyers, especially in more expensive metro areas.”
There is currently a two-month supply of inventory, a record low of 1.03 million units, at the current sales pace, according to the NAR. Properties typically remained on the market for 20 days in February — the swiftest pace since NAR started tracking how many days units stay on the market.
According to Corcoran, people are making bids and putting 10%, 20%, and 25% down on a home and waiving contingencies and inspections (which is dangerous). In 2019, the average down payment for first-time buyers was 6% and 12% for all buyers, according to NAR.
“Buyers have had the toughest [time], especially the last six months that I have ever seen in my life,” Corcoran said. Despite the frenzy, she doesn’t recommend buyers wait to make a purchase because we're not in a housing bubble. “Prices are going to keep going up,” she said. “I don’t see an end in sight, even if you wait three months you’ll pay more.”
Most economists agree. NAR forecasts median price for existing homes to end the year at $316,000 and reach $326,000 at the end of 2022. Similarly, CoreLogic projects home prices to increase 3.2% by February 2022.
'Best value right now in America'
But there may still be some areas in the U.S. where homebuyers can get good value for their money. If there's one city where you can find a good deal, Corcoran said it's Raleigh, N.C. Her pick is backed up by other experts' analyses.
A recent study released by LendingTree ranked the city No. 3 among the 50 most competitive metro areas in the U.S. The average price for a home in Raleigh is $340,000. "Raleigh is a very affordable midsize area,” LendingTree Chief Economist Tendayi Kapfidze recently told Yahoo Finance Live.
John Burns Real Estate Consulting has also identified Raleigh as an in-migration market in the U.S., based on the cost of U-Haul moving trucks. And The Urban Land Institute and PwC ranked Raleigh/Durham No. 1 for overall real estate and homebuilding prospects in its 2021 Emerging Trends in Real Estate report.
"You get great value there... It's the most competitive, but the value is still undervalued and so many young families are moving in and it's an educated population," Corcoran said. Raleigh is "probably the best value right now in America."
Amanda Fung is an editor at Yahoo Finance.
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