American Home Prices are in a Crisis

It’s almost as if history is repeating itself as home prices continue to rise in the U.S. According to the Mortgage Bankers Association, this is primarily due to the fact there aren’t that many houses for sale on the market.

Of course, that’s not the only reason why buyers are seeing high property prices nowadays. Let’s take a look at a few other things that contribute to the rise:

Housing pricing tripled during the decade leading up to the 2008 financial crisis. Back then, the rise in prices was attributed to the low supply of properties for sale, but the real reason why prices were so high was because banks were able to create money from thin air when they made loans.

The number of funds created through mortgage loans quadrupled over that period. That influx of money was responsible for the high prices then, and it also has a lot to down with currently rising prices.

Property prices rise at a much faster rate than wages. This means houses are becoming less affordable for many. The reduced number of buyers on the market causes prices to rise even more. The same goes for rental prices since increasing housing prices means there is more demand for rental properties.

Nowadays, first-time buyers are forced to spend a larger portion of their earnings just to purchase a home.

Recent graduates inherited a lot of problems and that affects how soon they are ready to purchase their first home. With the average buyer now spending 43 percent of their annual salary for a house down payment, up from about 17 percent a decade ago, there’s no point rushing to buy a home. You can figure out what your down payment will look like with a mortgage payment calculator.

Also, Rental properties have become a more attractive option for young adults who do not yet have stable careers.

With rising insurance and healthcare costs, many young people are taking their time when it comes to purchasing their first home.

Where people prefer to live also has a huge effect on house prices. The current trend is for millennials to move to large cities and that is one of the factors driving house prices up. Prices have shot up considerably more in large cities people flock to due to career opportunities like Silicon Valley.

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