In 2021, home prices rose at the highest speed ever recorded at 17% year-over-year, with the average American home increasing in value by $50,200. Last year, the median price of a home in the U.S. was $346,900. While homeowners might be rejoicing, those looking to buy their first home are facing considerable difficulties.
"December saw sales retreat, but the pull back was more a sign of supply constraints than an indication of a weakened demand for housing," the National Association of Realtors' chief economist is quoted in the agency's report. "Sales for the entire year finished strong, reaching the highest annual level since 2006."
The number of homes sold in 2021 increased by 8.5% to 6.12 million. By the end of December, the number of unsold houses on the market fell to a record low of 910,000 homes.
Yun said that the increase in home prices seen last year exceeded even that seen during "the days of subprime lending" prior to the financial crash of 2008. During that time, subprime mortgages were sold to homeowners who couldn't actually afford the price of the home they were buying. Since then, new regulations have been put in place barring this practice.
Rather than predatory lending, Yun says housing prices are currently being driven up simply due to the dwindling number of homes for sale.
"We are facing a major housing shortage," said Yun. "In December, we saw record low inventory, an all time low, there's simply not enough homes available for sale."
In the coming year, Yun says he expects home prices to increase again this year, but at a slower 4% to 5% year-over-year rate.
"The price gains will begin to normalize," Yun says. "And people should not anticipate another year of this double digit rate of appreciation."
The shortage is being caused by a number of factors. Along with the universal impact of the pandemic, the housing market was actually suppressed for a decade after the 2008 crash when countless homebuilders went out of business. By 2020, Freddie Mac
Now, labor and lumber shortages caused by the COVID-19 pandemic are being added to homebuilders' list of concerns, next to a lack of available land and restrictive zoning laws.
"Policymakers could help by reducing lumber tariffs... [and by] enacting zoning reform to allow builders to build with greater density," National Association of Homebuilders' chief economist, Robert Dietz, said.
