Record Prices For Red Hot Housing Market: 'Fear Of Missing Out'
A shortage of homes for sale is sparking multiple offers and bidding wars, driving the median sales price of a home in the U.S. to an all-time high of $341,600.
Home prices are up 19.1 % from just a year ago, also a record for the biggest gain in a year.
Lawrence Yun, chief economist for the National Association of Realtors, sums it up with one word: "Incredible." The group just came out with the report. He says homes are selling faster than ever before, too. On average, homes are getting 5.1 offers; some are getting a lot more — 20 or 30 bids. "I have not really seen it, even during the housing market bubble days," says Yun.
But he says we're not seeing a repeat of those bubble days. Mortgage underwriting standards are stricter than in the years running up to the market collapse in 2008. "Back then, the mortgage standard, there was none," says Yun.
Today he says people can afford the homes they're buying. But he says now the market is unhealthy in a different way-- a severe shortage of homes for sale. That's sent prices ever higher and it's making home ownership unaffordable for more people.
That's in part why the volume of home sales have declined slightly for the past 3 months, Yun says. In April sales fell another 2.7 percent. The demand is there. The problem is a lack of supply and affordability.
Many experts are cautioning homebuyers not to get caught up in bidding wars right now.
"Don't get caught up in the frenzy, don't be pressured," says Bruce Marks the founder and CEO of the Neighborhood Assistance Corporation of America. NACA offers free homebuying classes around the country and makes home-loans to first time homebuyers.
"Save some money, look at different neighborhoods," Marks says. In markets like this he says often homebuyers have to broaden their search for the type of home they want or the area they want to live in. He also says there's nothing wrong with waiting a year or two until there's a greater supply of homes to choose from, and when the bidding wars have died down.
"Get yourself prepared, and when you're prepared and you find that right house, then you can jump on it," Marks says.
Yun says many buyers see prices rising so quickly and panic and think they have to buy right away.
"They are experiencing the fear of missing out," Yun says. "But at the same time, people feel very uncomfortable needing to make a rushed decision on such a major expenditure."
But Yun says while prices may keep rising, they can't keep rising as quickly because they've been out-pacing income growth very dramatically for years.
"We anticipate that the market will be steadily calming down," Yun says. He polled realtors in his group and says they predicted over the next year a much smaller price gain of just 2.5%.
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