Two trends tell the tale for the US Housing Market
The housing market appears to be in another bubble. This one is different, as home prices and inventory are at historic levels. Two simple charts explain these challenges for realtors, buyers and sellers in today’s market.
The first chart shows the Case Shiller housing price index, a composite of home prices for the US. With January 2000 as the anchor point (index = 100), today’s index is rapidly approaching 2.5 times that benchmark. In short, homes are not in the affordable range, and haven’t been for a while.
Median prices of existing home sales have risen every single month, year-over-year, for nearly ten straight years. And housing inventory, as measured in months, is bottoming out. Both metrics make this an extremely prohibitive market for home buyers. This second chart shows housing inventory, which remains well below the “healthy market” range of 6 months.
Historically, six months of supply is associated with moderate price appreciation, and a lower level of months’ supply tends to push prices up more rapidly. In December 2020, the months’ supply was at a record low of 1.9 months
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Source: Inventory and Months’ Supply