COLORADO SPRINGS — Despite slowing in costs, the housing market is still seeing record high prices across the U.S. UCCS’s Tatiana Bailey explained what is contributing to these numbers and what the future looks like.
Bailey said that housing prices have skyrocketed over the last two years, with a recent report from Moody’s Analytics showing, that over 80% of housing markets in the U.S. are overvalued by an average of 24.7%.
According to Bailey, this is about the same trend as the Great Recession; the only difference is that the Great Recession was due to lax lending standards, which lead to people buying homes they couldn’t afford. This rapid housing appreciation, according to Bailey, is mostly due to a shortfall in single and multi-family home construction.
Bailey said that many builders went out of business, or simply became much more conservative in terms of building. The pandemic also caused a great migration, and many people were motivated by lower home prices in the south and midwest.
The 30-year mortgage rate is higher at 5.7% versus 2.7% at the end of 2020, and Bailey said that it is no surprise home sales are 20% lower than last year. Bailey believes that some cities are going to see significant adjustments to home prices, however, because of the shortage of housing, Bailey doesn’t think we are going to see the rapid and dramatic declines like in previous years.
Colorado still has young people moving here, and most of the population growth is from in-migration. Bailey said that price adjustments will likely be modest, and more likely that housing prices will stay at roughly the current levels.
“The issue is that those current levels are too high for many people who want to stay here or move here particularly young people,” said Bailey.