Home Prices Outpace 1990s, 2010s In Just 4 Years: Is It Sustainable?

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Zinger Key Points
  • Housing price growth in the last four years has already outpaced the entire 1990s and 2010s
  • The Fed has a tough job ahead of itself in order to bring inflation down without causing a housing market crash
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The average home price is now 40% more expensive than at the beginning of 2020.

That’s according to ResiClub, which outlines how the last four years outpaced the entire home appreciation of the 1990s and the 2010s:

  • Housing prices grew by 30.1% in the 1990s; 47.3% in the 2000s; and 44.7% in the 2010s.
  • Between 2020 and 2024, housing prices have already grown more than 47.1%.
  • The Case-Schiller index showed a .6% growth in home prices from January 2024 to February 2024.
  • Outside of a slight correction from June 2022 to January 2023, housing prices have continued to rise, putting pressure on potential buyers. 

Read Also: ‘My Mortgage Went Up $1,000 And I Am Not OK’ — ‘Bamboozled’ Homeowner Warns Don’t Buy A Home If You’re Single

Why It Matters: Even if you aren't shopping for a new home, higher housing prices may still impact you.

Rent and shelter costs comprise a large portion of the Consumer Price Index (CPI), a measure of inflation.

Higher housing prices mean that the CPI could stay above the Fed's target rate of 2%, which would typically result in tighter monetary policy.

As the Fed tries to bring inflation down through tighter-than-expected policy, economic growth could stall. Higher interest rates, and thus mortgage rates, could cause home prices to cool.

But, this should mean that prices, including housing prices, will retreat. Because there is consistent demand for housing and low supply in a lot of markets, housing prices could stay elevated despite mortgage rates currently hovering at around 7%.

Higher interest rates also make it more expensive for homebuilders to borrow money and build new projects, thus limiting supply further and keeping prices higher.

Dropping rates to encourage more building would also make it more attractive to borrow money and buy houses, so the Fed is aiming to find the level that is ‘just right'.

The majority of Americans have a large portion of their worth tied to their homeownership. So, it's unlikely that the Fed will create a situation that would crush housing prices too much. 

Now Read: Fed Keeps Interest Rates Steady, Announces Slower-Than-Expected Pace Of Balance Sheet Runoff (UPDATED)

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