Exceptionally strong demand, historically low supply and record low mortgage rates are helping to create the fastest home price increase since 2018. According to CNBC, home prices were 5.5% higher this past July than in 2019. That is up from the 4.3% annual gain seen in June (CoreLogic).
Recent falling mortgage rates increased demand from spring, when home sales bottomed out due to the start of the coronavirus pandemic. The average rate on the popular 30-year fixed fell below 3% for the first time even in July, giving additional purchasing power to buyers.
Lower-priced homes are sought after and have had faster annual price growth than luxury homes. First-time buyers and investors are actively seeking lower-priced homes, and that segment of the housing market is in particularly short supply.
The inventory of homes priced under $100,000 was down 32% annually in July, according to the National Association of Realtors. Compare that with the supply of homes priced at $500,000 to $750,000, which was down just 9%.
Home buying is gaining significant strength in outlining suburban areas as potential buyers seek more space for the new & work economy. Home prices in San Francisco were also less than 1% higher annually, compared with Washington, D.C., which saw prices up over 5%. There is much less flight from the D.C. area than from San Francisco, as tech workers, who can now work from anywhere, leave the latter in search of more affordable homes.