Can you hear that?
Yes, it’s the chatter of real estate markets.
Over the last couple of years, the housing market has been as hot as ever. In 2021, housing prices ballooned by 18.8%, and housing demand has continued upward since 2008.
According to the Wall Street Journal, middle-class Americans are being priced out of the new housing boom, making affordability a massive issue:
“At the end of 2019, there was one available listing that was affordable for every 24 households in this income bracket. By December 2021, the figure was one listing for every 65 households.”
With inventory at an all-time low as recently as the end of 2021 and demand nearing an all-time high, the housing market looks like it's set to burst.
But what’s driving this flurry of activity?
Today, we wanted to take a closer look at the state of the U.S housing market in charts, including how we got here and what that data might mean for all buyers, whether you’re a first-time homebuyer or someone who has moved quite a bit.
Here are five powerful U.S. housing market charts that help illustrate these mind-blowing real estate trends.
The Markets Say “Jump,” and Houses Ask, “How High?”
First, let’s look at a chart that will provide some perspective on just how much home prices have climbed.
The S&P/Case-Shiller home price index is a popular measure of national housing prices. To construct the index, they take samples from 20 cities across the U.S.
In December of 2021, the index rose to 287. By comparison, the index was 207 at the height of the 2008 housing bubble. That’s a 39% increase from the peak!
What’s fueling this massive increase?
It’s likely a combination of broad demand for new homes and record low interest rates that make borrowing large sums of money more affordable. Though interest rates are on the move, so there’s potential for a respite from the storm.
As of February 28th, 2022, housing prices are at an all-time high as illustrated by the S&P/Case-Shiller U.S. Real Estate Market chart below.
The S&P/Case-Shiller index is an important measure of national housing prices. This chart uses the 20-city index. As you can see, home prices continue to rise to record levels as many seek new homes.
New Construction Is Going Up
In addition to rising home values, people are building more homes, making homebuilders in high demand.
With record shortages, pre-built houses can be hard to come by, so some homeownership hopefuls decide to build.
Housing starts as of March of 2022, which indicate new residential construction projects, were 35.7% higher than the average over the past several decades. Historical data from the U.S Department of Commerce measures this factor during the month construction begins.
We see the same trend with building permits, too. The chart below indicates that even more new construction is on the horizon since a building permit means someone has taken steps to get approval for their construction.
Building permits are 39.7% higher than historical average.
But building your own home won’t come cheap. Construction costs hit record highs in 2021. Data from the U.S Census Bureau found that prices for construction rose by 17.5% from 2020 to 2021—the most significant jump since 1970.
Material and labor costs are also making homes that much more expensive. Overall, material costs increased by over 23%, with lumber skyrocketing by 85%. So, if you’re looking to build, be sure to account for these additional expenses.
Existing-Home Sales
Home sales are going steady as demand continues to rise alongside the growing economy.
Unlike the previous data, this U.S. housing market chart examines the sale of homes already built. In March of 2022, 5.77 million existing homes were sold.
While existing home sales have seen a slight decline since the start of the year, what’s even more interesting is the price these homes are selling for. At the end of 2019—pre-pandemic—the median sales price for a house was $327,100. At the end of 2021, the median price bounces to $408,100. That’s a 124.8% increase over two years!
How Quickly Are Homes Selling?
Our next real estate market graph indicates the relative supply of available homes or the monthly inventory.
The months’ supply of inventory is a technical measure that estimates how long it would take to sell every home that is currently available to buy based on recent market activity.
This is notably different from new construction or existing home sales in that this measure compares the supply of homes with the level of demand in one number.
When this number is lower, it means houses are selling quickly.
While the average metric is 5.7 months, we’re currently sitting at 6.4 months as of March of 2022. This increase is likely due to higher home price tags, which we explored above.
Keep in mind that supply plummeted at the onset of the pandemic when the initial home-buying spree began. Experts found that inventory plummeted 53% when compared to pre-pandemic levels.
Even though the supply of homes has increased since then, it is still limited. We expect to see limited supply continue to drive housing construction.
Mortgage Refinancing
Although not a measure of new construction or sales, mortgage refinancing is another relevant item in the real estate market.
People have many reasons to refinance.
Cash-out the equity in their home
Adjust their loan term (going from a 30-year to a 15-year mortgage, for example).
Lower their monthly payment.
Regardless of the borrower's reason, refinance activity is highly correlated with interest rates.
The lower the interest rate, the more likely borrowers will be to refinance because the new mortgage will have a lower rate. Rates have been at historic lows, making refinancing an appealing option.
In this graph, you can clearly see that refinancing spiked at the beginning of 2020. Again, this is directly tied to the fact that the Federal Reserve cut rates in response to the Covid pandemic. To avoid confusion, notice that the 30-year treasury rate, displayed on the right side of the chart, is inverted.
This activity will slow down as mortgage rates start to go back up. Considering that inflation fears are at the forefront of the national economic stage, this is likely to happen soon.
In fact, the average interest rate for a 30-year fixed mortgage is already 4.91%. Plus, the Fed announced plans to continue hiking interest rates over the course of the year to help counteract high inflation levels.
Understanding The Housing Market
The housing market has been a marvel to watch and study over the past couple of years. Understanding where these numbers come from can help bring comfort and knowledge to the situation.
There’s no better antidote to fear and confusion than education and knowledge.
We hope you found these real estate market graphs and charts and our explanations to be helpful. If you have any questions or need help seeing how the real estate market may affect your ability to retire comfortably, give us a call. We would be happy to help!
And remember, if you’re saving for a home, check out our free guide about the best accounts to save more money. Happy reading!
About Mark Fonville, CFP®
Mark is a personal financial advisor and the President of Covenant Wealth Advisors. He manages investment portfolios and provides retirement income planning and retirement tax planning for individuals age 50 plus who have over $1 million in investments.
He has been featured in the New York Times, Barron's, Forbes, and Kiplinger Magazine. Schedule a call.
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