“Over the last five years, we have seen home prices break records early in the season as buyers try to get ahead of the competition,” says Danielle Hale, realtor.com’s chief economist. “But this is the first time the record has been broken in February, signaling that competition is already heating up weeks before the start of the spring buying season compared to past typical years.”
The number of homes for sale remains at record lows. Len Kiefer, deputy chief economist at Freddie Mac, believes it could take between four or five years to fully ramp up enough new housing to meet demand. Builders are facing multiple challenges, like labor and lot shortages and growing material costs that are preventing them from adding more inventory.
But home buyer demand remains high and home prices are surging as a result of competition for low housing inventories. Hale says a slight improvement has been made on the inventory front: February saw declines in new listings improve for the first time since November 2021. “Whether inventory continues to improve will depend on a variety of economic and geopolitical factors, including the conflict in Ukraine and mortgage rate hikes, which haven’t impacted home sales or price growth so far, but will increasingly lessen buyers’ purchasing power,” she says.
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