Pushing Home Prices Higher - Oro Valley Real Estate
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Millennials are jumping into homeownership in larger numbers, and they’re firing up home prices.
Home price gains had been shrinking over the last year, but increases reversed course and annual gains started trending higher this summer. Home prices increased 3.6% in July compared to a year ago.
Sales of new and existing homes this July were up from a year ago, supported by low mortgage rates and rising family income. With the for-sale inventory remaining low in many markets, the pickup in buying has nudged price growth up. If low interest rates and rising income continue, then we expect home-price growth will strengthen over the coming year.
More than a quarter of millennials—the nation’s largest generation—says they’re interested in buying a home in the next 12 months. But limited supplies of homes for sale are undercutting their house hunt. At the end of July, the inventory of homes for sale was nearly 2% lower compared to a year ago. In July, there was a 4.2-month supply of homes for sale; a six-month supply is considered a balanced market.
A growing number of millennials are expressing an interest in buying homes, reinforcing the theory that this cohort is continuing to engage within the housing market. But with so few homes available for sale, the imbalance has created an affordability crisis that is getting worse every day. Demand exceeds supply and we’re unsure of when the two will balance out.