4 reasons home prices will keep going up

Here are 4 reasons home prices will continue to increase over the longer term:

Household formation has rebounded
Over five years during and after the 2007–09 recession, the number of households established in America plummeted by about 800,000 a year from the previous seven years. From 2007 through 2011, an average of roughly 550,000 households formed each year in the United States, according to the U.S. Census Bureau. This number was the lowest level since records started being kept after World War II, and was 59 percent below the annual average of 1.35 million household formations from 2000 to 2006. After dropping again in 2012/13 new household formation has rebounded strongly since late 2014.

US Census Bureau

Home Ownership rate at 30 year low
The rate fell to the lowest level since 1988 and is down from a 2005 high of 69.2%.

Source: US Census Bureau

Source: US Census Bureau

Housing remains very affordable%
The Urban Institute determined what a family could afford with 20% down and a monthly housing payment of no more than 28% of median household income at the prevailing Freddie Mac 30-year fixed rate. Even if the mortgage rate were to spike to 6% (from the current 3.84%) the maximum affordable price would still be more than 20% above the current national median level.

Source: Urban Institute

Source: Urban Institute

The US population is growing rapidly
The current population of 320 million is forecast to grow to 400 million by around 2050. The increase is equivalent to adding the current population of Germany and is more than the current population of the UK, France or Italy.

Source: US Census Bureau

Conclusion
Demographics support continued long-term demand for housing in the US.

If you – or somebody you know – are considering buying or selling a home and have questions about the market and/or current home prices, feel free to contact me on 617.834.8205 or Andrew.Oliver@SothebysRealty.com.

Andrew Oliver is a Realtor with Harborside Sotheby’s International Realty. Each Office Is Independently Owned and Operated

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