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  • Writer's pictureSarah McKee

Why Home Prices Will Keep Increasing

I’ve had a few people ask me “When will the housing market crash again?” or say “Prices are crazy! This has to be a bubble!”, but in 2022, a crash does not appear to be on the horizon. Market conditions are very different from those we saw during the price peak of the 2000s primarily because instead of being in a housing bubble, we are in a housing shortage.

A major lack of inventory is the biggest contributing factor to escalating prices. Supply is nowhere near meeting demand, leaving many buyers vying for few properties. Right now, we have historically low inventory that will likely take years to balance. How did we get so behind on meeting housing needs? Here are three key factors;

Years of Reduced Production

Home construction has not kept pace with population growth over the past 20 years. Builders reduced construction after the housing crash of the 2000s to a fraction of production. After hitting the bottom in 2011, the pace did increase annually but not enough, and is currently 55% lower than in 2006.

Recent Supply Chain Issues

Covid-related supply chain issues are still affecting many industries and have caused increases in costs and timelines for new construction in recent years. Difficulties obtaining building supplies like windows, lumber, and home appliances create delays and price increases for new homes.

There are Lots of Millenials

Millennials are the largest generation of adults in the country and have aged into homeownership during this housing scarcity. In fact, the US currently has the least amount of housing available since the 1970s to offer! This lack of supply to meet demand results in lots of buyers competing for a relatively small number of single-family homes, and that competition drives up prices.

In a market that is poised to be competitive for the foreseeable future, having a strategic agent by your side will be key to success if you are thinking of making a move. Winning in this type of market does require more strategy, but taking advantage of today's lower interest rates may be your best move in the long run, as there are no indications of a crash or a major increase in inventory on the horizon.


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