In The Wall Street Journal, Laura Kusisto reports that prices are now just 2% below their 2006 peak, but those price gains aren’t stemming from increased volume demand, but instead from lack of supply. Kusisto writes:
Home prices rose in 83% of the nation’s 178 major real-estate markets in the second quarter, according to figures released Wednesday by the National Association of Realtors. Overall prices are now just 2% below the peak reached in July 2006, according to S&P CoreLogic Case-Shiller Indices.
But most of the price gains, economists said, stem from a lack of fresh supply rather than a surge of buyers. The pace of new home construction remains at levels typically associated with recessions, while the homeownership rate in the second quarter was at its lowest point since the Census Bureau began tracking quarterly data in 1965 and the share of first-time home purchases remains mired near three-decade lows.
The lopsided recovery has shut out millions of aspiring homeowners who have been forced to rent because of damaged credit, swelling student loans, tough credit standards and a dearth of affordable homes, economists said.
In all, some 200,000 to 300,000 fewer U.S. households are purchasing a new home each year than would during normal market conditions, estimates Ken Rosen, chairman of the Fisher Center of Real Estate and Urban Economics at the University of California at Berkeley.
“I don’t think we are in a normal housing market,” said Lawrence Yun, chief economist at the National Association of Realtors. “The losers are clearly the rising rental population that isn’t able to participate in this housing equity appreciation. They are missing out on [a big] source of middle-class wealth.”
Ownership is an important part of your economic safety and stability. I have regularly urged young people to make the sacrifices necessary to become part of the ownership society. Read more here, here, and here.