Financial Gap Widens Between Homeowners and Renters
Home prices are on the rise, as limited housing inventory causes demand to outpace supply. In May, the median price of an existing home sold was $252,8000, up 5.8% from May of last year. 55% of homes were sold in less than a month. The National Association of Realtors (NAR) reports the average time on the market was just 27 days in May, down from April’s figure of 29 days, a new record low.
As home prices increase, homeowners build equity. The current value of total housing equity has doubled in the past five years from $6 trillion to over $13 trillion. Despite low mortgage rates, would-be homeowners are struggling to afford rising prices and save for a down payment.
NAR chief economist Lawrence Yun explained in a statement, “because of the run-up in home prices, it’s making it more difficult for renters to convert into homeownership. We are essentially stuck at a 50-year low in the homeownership.”
Even as builders work to replenish inventory, there are very few low-priced, entry-level homes for sale. First-time home buyers are struggling to transition from renting to owning, further widening the financial divide.
Yun forecasts, “with new and existing supply failing to catch up with demand, several markets this summer will continue to see homes going under contract at this remarkably fast pace of under a month.” According to NAR research, of the barriers faced by first-time homeowners, single-family housing shortages will be the biggest challenge.
Sources: CNBC, Forbes, US News and World Report