Prices will continue to rise due to a supply-demand mismatch
The UK housing market is in a cycle of rising prices, with demand outstripping supply. Halifax, the country’s largest mortgage lender, reports that prices are rising faster for 18 years. In June, Halifax’s house price index was 11.4% higher than the previous month and was up 13.8% year-on-year. The average house price now costs PS294,845.
Housing prices have already risen over pre-pandemic levels in many cities. While rental deals are a popular option for new homeowners, these deals are unlikely to last long. Goldman Sachs estimates that prices will rise through 2022, reaching their highest level since the Great Depression. In fact, the firm expects shelter inflation to reach 4.5% by 2022, the fastest rate in two decades.
This is primarily due to the underbuilding of homes in the U.S. A recent study by Freddie Mac estimated that there would be 3.8 million fewer homes than are needed by the end of 2020. The shortage is also due to limited land and building materials. The shortage will require some price adjustments to clear the market.
Millennials are moving out of necessity
The Great Recession was particularly hard on Millennials, both in terms of job-holding and wages. While the economy has begun to recover somewhat, job opportunities aren’t providing enough impetus to move out of necessity. More than half of those aged 25 to 35 still live at home, either out of necessity or to save money.
The median home price in many desirable cities is out of reach of most middle-class households. Land-use regulations and opposition to new construction have only exacerbated this issue. This is forcing many millennials to relocate outside of their preferred cities. Housing prices are higher in booming cities, while housing prices are more affordable in the South.
Millennials are also facing rising rent costs. Rent can consume as much as 45 per cent of a millennial’s income. This increase in rent is a result of higher demand for rental housing. Furthermore, the increase in rent costs will encourage more landlords, driving up the prices even further.
New construction is on the way
New construction is a great way to make your home look brand new. The downside is that this type of construction takes time to get approved and permits. If you’re looking for a new home in a hurry, you’ll want to consider semi-custom or spec options instead. Before you decide on a new construction builder, however, it’s important to do your research. You should check out their reputation, business reviews, and public records. You should also meet with them and visit some of their completed projects.
New construction can also save you money, especially if you have a limited budget. New construction homes may be cheaper than your existing home, and you’ll have more room to customize them to suit your needs. And because there’s so much competition in the housing markets, the cost of buying a new home can be more affordable.
West Coast markets have seen a surge in sales
The West Coast markets have historically been one of the strongest in the country, and demographics support continued growth. However, the rise of e-commerce and the ease of shopping online has reduced foot traffic, resulting in a drop in demand for traditional retail. In addition, the recent coronavirus outbreak has forced the nearly total shutdown of retail stores in several West Coast markets.
Sales of single-family homes rose across all price ranges last month, including those under $300,000. In contrast, sales of million-dollar homes dropped by 18.3% over the same month last year. Meanwhile, condo prices declined by more than $10,000 in the past month, and sales climbed nine per cent.
The West Coast housing market has experienced an uptick in recent months, but it’s cooled down somewhat compared to the rest of the country. A recent Redfin study of the 100 largest U.S. markets found that Seattle and San Francisco are among the 10 hardest hit. This could be caused by the Federal Reserve’s latest move to raise interest rates, which will raise homebuying costs.