The Real Reason Home Prices Aren’t Coming Down Anytime Soon

If you’re a prospective homeowner waiting for inflated housing prices to finally start falling, you might want to get comfortable — it looks like it’s going to be a long wait.

While inflation numbers elsewhere are finally beginning to moderate, the fundamental economic law of supply and demand is poised to keep the price of houses high for the foreseeable future.

What’s really going on

According to the most recent estimates, the median cost of a home in the United States has topped $419,000. Even though that number has decreased modestly since 2022, it still represents a whopping 40% increase over where it was in January 2020.

Of course, that was before COVID-19 derailed our entire society. But the pandemic is just one piece of the puzzle.

Finance company Freddie Mac says the housing market is nearly 4 million units short of demand, and here are a few main reasons why:

• A labor shortage means some new projects are stalled.
• Strict regulations and zoning issues prohibit residences in many areas.
• Residents in other areas are pushing back against plans to build additional homes.
• Remote work has driven up the demand for new and bigger residences.

What it all means

The stubbornly high cost of purchasing a home means even more people are stuck renting, which in turn means that rental costs have skyrocketed in recent years.

Whether you’re looking for something to buy or something to rent, many areas of the country simply don’t have enough units to go around.

For would-be home-buyers, that means it’s all but impossible to take that step toward what many consider the “American dream.” In many other cases, the consequences are much worse.

Without affordable housing, families in communities across the country are facing the real threat of becoming homeless.

Chris Agee June 21st, 2023

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