Home ownership is the key to wealth development in the United States. Record high home prices are distorting the real estate market such that many first-time buyers are unable to buy a home. A national average housing price correction of 10-20% may be in the offing, but inflation and rising interest rates will more than offset the benefit of lower prices to make housing more unaffordable. Potential first time buyers will need to be sophisticated, agile, and disciplined to position themselves for opportunities that may arise in what will likely be a volatile market in the next few years.
Home prices are high by nearly all measures, but there is wide regional variation. The CoreLogic Home Price Index (HPI) posted the highest year-over-year growth in its 44-year history by the end of 2021. CoreLogic last week reported 65 percent of regional U.S. housing markets are overvalued based on earnings to price ratios. Zillow reported in February, 2022 that 481 cities nationwide have a typical home value of at least $1 million and 49 more may join the list this year.
How Did We Get Here?