The U.S. housing market gained $2.4 trillion over the last year, bringing its total value to $47.5 trillion, according to new data from Redfin (NASDAQ:RDFN).
The average U.S. was valued at $495,183 as of December, up from $474,740 a year earlier. In percentage terms, the total value of homes increased 5.3% from a year earlier in December, the biggest increase in 11 months, and was up 13.3% ($5.6 trillion) from two years earlier. Redfin attributed this increase to the ongoing low inventory of available residential properties, a rebound from a drop in home values at the end of 2022, and a growing number of newly constructed homes.
Redfin also noted the total value of homes in urban areas rose 3.6% year over year to $10.1 trillion in December while the value of homes in the suburbs rose 5.6% to $29.2 trillion and the value of homes in rural areas increased 6.3% to $7.4 trillion.
“America’s homeowners are sitting pretty – they’re holding a massive amount of housing wealth, despite lackluster demand from buyers, because home values skyrocketed during the pandemic and now a supply shortage is preventing those values from falling,” said Redfin Economics Research Lead Chen Zhao. “Prospective buyers aren’t as lucky. The combination of elevated mortgage rates, high home prices and a limited pool of homes for sale means homeownership is about as unaffordable as ever. One bright spot for buyers is that mortgage rates should start declining before the end of 2024.”
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I’m curious as to why so many think the interest rates will drop. In looking at the pricing index with the Federal Reserve, they are back up to what they had been for 30 years. The lows of 2.5 to 5% were the lowest in about 50 years. Buyers expecting to wait for those lows again may be waiting for a long time. We need more inventory to drive pricing down. Home pricing is over the top due to low inventory. It was those low interest rates, coupled with pricing, then driven by covid for many to get out of the city that put everything where it is. We now see the Pricing Index coming bac to near “0”, which means home prices should not continue to climb as they did.
Because people are, in general, economically illiterate.
I think people will try to wait it out but the rates wont ever go back down to 3-4% like before. 6 and 7% is here to stay in our lifetime.