Home Prices Continue Record Surge Even As Recession Looms

The U.S. housing market continues to move counter to the Biden administration’s rosy economic narrative as home prices are soaring nonstop to new record highs even as mortgage rates have climbed to their highest levels in over two decades. The trend reflects a troubling reality about the imbalance between housing supply and demand that government and corporate media apologists are having a difficult time massaging away in the leadup to the 2024 election.

October 2023 witnessed a remarkable surge in home prices in the face of escalating mortgage rates. The S&P CoreLogic Case-Shiller 20-city house price index reported a 4.9% increase in home prices compared to October 2022, marking the sharpest increase in 2023. October’s numbers marked the ninth straight month of increasing year-over-year prices.

The most significant driving force behind surging housing costs is the severe shortage of homes for sale. Historically low inventory levels have created a seller’s market, where demand significantly outstrips supply. The problem of insufficient supply is only exacerbated by the increasing reluctance of current homeowners to sell their homes. There is no economic incentive to exchange their existing fixed-rate mortgages obtained when rates were much lower for a new purchase loan at current rates.

The impact is the bizarre situation now hammering Americans. Counter to ordinary economic incentives, rising prices have not tamped down the enthusiasm potential purchasers have to enter the market. Instead, the fewer buyers who can qualify for loans with higher rates and larger down payments are snatching up the limited supply even faster, often paying above the asking price demanded by sellers.

With higher home values, the average down payment required to buy a home has also reached new record highs. According to Realtor.com, buyers in the third quarter of 2023 were putting down an average of almost $30,500, a striking 118% increase from four years ago. Prospective buyers without substantial savings or existing home equity are left without realistic purchase options. The vicious cycle then drives up the demand for rental properties even more.

In 2023, the U.S. rental market witnessed a substantial increase in asking rents. According to Zillow, the typical asking rent in the U.S. stood at an average of $1,982 as of November 2023, marking a 3.3% increase compared to the same period in 2022. Surging rental costs are more pronounced in the single-family home segment.

The current scenario raises continuing concerns about housing affordability and accessibility. The American dream of homeownership is becoming increasingly elusive for most citizens, especially first-time buyers who increasingly find themselves completely priced out of the market.