HOME SALES & PRICES BOLSTER
Housing market signals dramatic suburban transformation. Homebuying is being driven in large part by changing demographic trends that have been accelerated by the health crisis. The aging of the millennial generation into the homeownership phase of life and more households seeking larger spaces in lower-density areas as they work and attend school from home have driven housing demand in the suburbs. Home sales are also being fueled by historically low interest rates and a surge in savings during the pandemic that are helping more prospective homeowners afford the associated downpayment and mortgage. Lower land costs farther from metro cores are keeping many developers focused in suburban and exurban locales.
Housing shortage reiterates value of apartments. During March, the supply of both new and existing home sales remained near a historic low, resulting in many potential homeowners being repeatedly outbid as prices continue to soar. The median cost of an existing home jumped 3.0 percent in March alone to $342,400, a new all-time high. Over the past 12 months, the price has surged 18.4 percent, which is the fastest pace of annual price growth since at least the 1960s. As a result, the monthly payment for a 30-year loan on a median-priced home, with a 10 percent downpayment and including taxes and insurance, rose to $1,926. In contrast, the average effective rent on a Class A apartment is $1,787 per month, underscoring the value of rentals. The tight supply and rising cost will delay many renters from transitioning to homeowners, providing a bright outlook for suburban rentals.
*Through March
Sources: Marcus & Millichap Research Services; Capital Economics; Moody’s Analytics;
Mortgage Bankers Association; National Association of Realtors; National Association of Home Builders;
RealPage, Inc.; U.S. Census Bureau; Wells Fargo