Despite recovery in inventory, home prices continue to rise due to supply imbalance

From CNBC: 2024-07-09 17:11:32

The housing market has seen a historic shortage of inventory, with new and existing home supply finally starting to rise. However, there is an unusual discrepancy between the supply of new and existing homes, with a nine-month supply of newly built homes compared to just 4.4 months for existing homes, leading to continuously rising home prices.

This unique supply scenario can be attributed to past events such as the subprime mortgage boom, the foreclosure crisis, and the Covid-19 pandemic. Roller-coaster mortgage rates, dropping to historic lows at the start of the pandemic and then spiking to 20-year highs, have also contributed to the current divide in supply between new and existing homes.

Despite an increase in supply, particularly in the low-end price tier, home prices remain stubbornly high. There is a 2.7-month supply of homes priced between $100,000 and $250,000, with supply up 19% from last year. Prices in May were 4.9% higher than a year ago, with some markets seeing further price growth due to inventory levels.



Read more at CNBC: Why home prices are still rising even as inventory recovers