SOUTHAMPTON, NY — Higher home prices are here to stay, at least for the next two years, experts say.
The coronavirus pandemic has helped boost home prices, but it's not the only factor responsible for the market shift. The number of homes listed for sale is at an all-time low, meaning supply is tight. Meanwhile, demand has increased because of historically low mortgage rates and because a large group of millennials are looking to buy their first homes.
Home prices in the Nassau County-Suffolk County NY Metropolitan Division, which includes Suffolk County, rose 10.8% in January 2021 compared to January 2020, according to the CoreLogic Case-Shiller Index, a frequently reported measure of price movements over time.
Metropolitan Statistical Areas, Micropolitan Statistical Areas, and Divisions are a product of the US Census Bureau and are used to identify areas with strong economic ties. contain one or more counties depending on population density.
Prices in the bottom third (less than $480,000) of the Nassau County-Suffolk County NY Metropolitan Division market — often defined as starter homes — rose 12 percent year over year. The top third of the market (homes over $665,000) saw a 12 percent increase.
The Flagstaff, Arizona, metropolitan area saw the largest year-over-year increase in January at 24.1 percent, followed by the Boise, Idaho, area at 22.2 percent and the Bend-Redmond, Oregon area at 22.1 %.
Less than 1 percent of metro areas saw a year-over-year price decline, according to the Case-Shiller index.
Spring 2021 is poised to be the most competitive home buying season in decades. A recent analysis of Realtor.com listings by the National Association of Realtors found that 64 percent of metro areas saw double-digit increases in median listing price year over year. Only 1 percent of metro areas had more active listings on Realtor.com in March 2021 than in March 2020.
A number of factors have led to the historic rise in home prices, said Gay Cororaton, director of housing and commercial research for the National Association of Realtors.
The main factor was the historic lack of supply in the housing market, Cororaton said. The stock is at its lowest point since 1982.
It could be some time before the housing market returns to a sense of normalcy, he said. The current inventory is about two months of housing supply. Supply and demand are more synchronized when there is a six-month supply.
“I think it's going to take time to do that,” Cororaton said. “At least over the next two years, I would expect we'll have about two to four months of supply.”
One reason for the housing shortage is a slowdown in new housing construction. There were 1.4 million new home starts in February 2021, compared with 1.6 million in February 2020, Cororaton said. The high cost of lumber is a factor in this decline.
The pandemic has also kept homeowners from letting potential buyers into their homes for showings or open houses, Cororaton said.
Historically low mortgage rates have pushed up the demand side of the equation, Cororaton said. Interest rates are not expected to rise above 4% over the next two years, meaning borrowing will remain affordable.
The National Association of Realtors' monthly survey of its members found that four buyers are competing for every home sold, compared to three buyers at the same time last year.
Demographic change is another factor, Cororaton said, as more millennials become interested in owning homes.
Editor's Note: This post was automatically generated using an analysis of Case-Shiller Index data by CoreLogic Inc. from the Associated Press. Please report any bugs or other feedback to content@patch.com.
