Here’s why home prices are still rising

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‘Experts’ predicting a housing market crash are overlooking something

While mortgage rates continue to remain elevated, and have even started going up again, home prices aren’t coming down. In fact, the national average price is still going up.

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 5.5% annual gain in December, up from a 5.0% rise in the previous month. While that has prompted many “experts” on YouTube to predict a coming “collapse” in home prices, other evidence suggests that simply isn’t in the cards.

A new nationwide analysis from points to the biggest reason. The U.S. needs an additional 7.2 million homes to meet current demand. When demand exceeds supply, prices stay high.

Even with rising mortgage rates -- the 30-year mortgage rate is up for a fourth straight week -- home prices could remain higher until there is a plunge in demand or a huge increase in inventory.

"The U.S. is in a long-term housing shortage with the construction of new homes failing to keep pace with a growing population,” said Danielle Hale, chief economist at “While a recent uptick in new construction has the potential to alleviate the historically low level of homes for sale on the market today, it's going to take some time to close the gap." 

So waiting for home prices to crater might not be a winning strategy. Naturally, not all housing markets are the same. Places like Austin have seen double-digit declines in home prices but those markets tended to be pretty expensive to start with.

It’s all in the math

Here’s the problem in a nutshell: In 2023, an additional 1.7 million households formed, resulting in a total of 17.2 million new households between 2012 and 2023. 

In response, homebuilders started construction on 947,200 single-family homes and 472,700 multi-family homes in 2023, bringing the 2012 to 2023 overall housing starts total to 14.7 million homes, roughly 10 million of which were single-family. 

The gap between single-family housing starts and household formations grew from 6.5 million at the end of 2022 to 7.2 million at the end of 2023 as household formations remained steady and single-family home construction began to decline. 

New homes cost more

And new home construction didn’t benefit all would-be homebuyers because new homes tend to be more expensive than existing homes. There are fewer existing homes for sale because owners who have a 3% mortgage rate don’t want to sell and buy another house with a 7% mortgage rate. Hale says that a lot of the current home construction could help renters.

“The elevated level of both single- and multi-family construction coming to market this year is likely to put downward pressure on rent prices in many markets, welcome news for renters,” she said. “It also means that the higher than usual share of new homes for sale is likely to continue, giving home shoppers willing to consider new homes more options."

But to buy a new home consumers need a strong income, plenty of cash for a down payment and an excellent credit score to afford a purchase. data show only 43% of new homes in 2023 sold for less than $400,000.

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