We have seen 17 consecutive months of home price increases across the country. With this said, April 2021 just set a record for the highest annual home-price growth rate since the mid 1990’s, according to Black Knight Data & Analytics Home Price Index (HPI). Fueled by the persistent low inventory of homes for sale, the number of active for-sale listings was down year-over-year 53% in April. This has equated to a deficit of nearly 750,000 available homes for sale.
What does this mean?
Even with mortgage interest rates within a quarter point of historic lows, aggressive home price growth has had a tremendous impact on affordability. As of June, the share of the median income needed to make the monthly payments on the median-priced home had risen to 20.5%. The good news is that this is still more affordable than the 25-year average of 23.6%. Unfortunately, this share is still higher than the 5-year average of 20.1%.
In recent years, 20.5% has been the tipping point at which home price appreciation begins to decelerate. However, the persistent inventory shortages have continued to fuel the dramatic rise in home prices.
Although low mortgage interest rates allow more buyers to enter the market, the main driver behind the recent home price appreciation has been the historically low inventory of homes for sale. In South Florida, the other dynamic at play is also the increased number of Americans migrating to the area. This is adding to the competitiveness in the home buying market and thus driving prices considerably higher.
Looking at year-over-year prices, single-family homes saw the biggest increase at 15.6% while condos saw an increase of 10%. It is expected that mortgage rates should rise within the next 6 months and that should decelerate the pace of home price appreciation. Lastly, increased rates of natural immunity and vaccination rates for COVID-19 should also result in more homeowners listing their properties for sale. This combined with more new home construction would certainly help with the current inventory constraints.
Are you looking to buy or sell a property in South Florida? We can help. At Live South Florida Realty, Inc. we have local and knowledgeable real estate agents throughout Palm Beach, Broward, and Dade counties. Call us today!