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Rising Home Prices Are Straining the Real Estate Market

Rising Home Prices Are Straining the Real Estate Market

Group of house icons with a sign sold on one of them

With home prices rising exponentially, the supply of affordable homes has dropped significantly over the years. The scarcity of safe and reasonably priced housing is hurting more potential homebuyers almost daily. Potential effects go past individual prospective homeowners, with increasing consequences for the society as a whole.

How Rising Home Prices Are Affecting Home Buying

Successful homeownership fosters economic well-being. Homeowners have a high likelihood of investing in their local economy, participating in the running of local government, and leaving more assets to their children. Unfortunately, average wages have been risen by only 16% since 2012, while national home prices have increased by 47%. These factors could significantly impact long-term, generational economic well-being.

Only 31% of would-be homebuyers aged 25 to 34 are convinced they will find low-cost homes within their price range. Unlike earlier generations, Millennials and Gen Z are getting into the job market with huge amounts of crippling debt. That, coupled with the concentration of jobs in pricey areas, is slowing down home buying significantly. Additionally, the COVID-19 pandemic has and continues to present a unique set of challenges to the real estate sector.

Racial Inequality in Homeownership

Another problem facing the real estate market is racial inequality in homeownership. The Census Bureau reports that the rates of Non-Hispanic White homeownership have ranged from 70% to 80% between 1994 and 2019. Homeownership rates for Black and Hispanic people, on the other hand, have ranged from 40% to 50%.

Addressing the Housing Appreciation Challenge

Expanding social housing, enhancing tenant protections, and implementing strict regulations in the mortgage market would help ease the housing affordability problem. Reducing vacation homes and rentals would also have a significant effect on housing appreciation. Another effective solution would be to curb foreign investment. For instance, when Vancouver enforced a 15% tax on all sales to international homebuyers, the cost of single-family property slumped by 20% before rebounding, offering housing affordability a short reprieve.

Getting Help with Home Buying

The process of choosing the right home to purchase is complex, and homebuyers can find it helpful to have someone knowledgeable in the process by their side. A real estate attorney can help a homebuyer in reviewing his or her purchase agreement before signing it. The attorney can also examine the deed, legal descriptions, mortgage loan paperwork, title, and other crucial documents.

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