There's a lack of affordable housing in this country, and it's starting to weigh heavily on home prices.
The national median existing single-family home price increased 4.3% annually to $279,600 in the second quarter of 2019, according to the National Association of Realtors, which showed that prices rose in 91% of measured markets.
NAR Chief Economist Lawrence Yun said in order to prevent greater price appreciation in more affordable metros, homebuilders must bring more homes to the market.
“New home construction is greatly needed; however, home construction fell in the first half of the year,” Yun said. “This leads to continuing tight inventory conditions, especially at more affordable price points. Home prices are mildly reaccelerating as a result.”
According to NAR’s findings, 93 out of 178 housing markets experienced price growth of 5% or better in Q2.
Yun warns that this acceleration will likely lead to a greater slowdown in home sales.
“Housing unaffordability will hinder sales irrespective of the local job market conditions,” Yun said. “This is evident in the very expensive markets as home prices are either topping off or slightly falling.”
Earlier this year, Harvard's Joint Center for Housing Studies dove into the issue with a study exploring how a lack of inventory was driving up house prices and rents, especially for average earners living in high-cost markets.
According to the center, the housing market is constrained by production that has settled below historical levels for more than a decade.
In order to combat the decline in inventory, the researchers suggests removing barriers that impede the process of home building.
“To ensure that the market can produce homes that meet the diverse needs of the growing U.S. population, the public, private, and nonprofit sectors must address constraints on the development process,” the researchers wrote. “And for the millions of families and individuals that struggle to find housing that fits their budgets, much greater public efforts will be necessary to close the gap between what they can afford and the cost of producing decent housing.”