Real estate prices are soaring. This is a huge surprise given a year of pandemic economics, business closings, and widespread unemployment. The good news is surely unexpected and an outright relief to real estate investors and property owners in general.
The big question going forward is what will happen to property values nationwide. Will they rise, fall, or remain steady?
So far, at least, home sale price reports from the National Association of Realtors (NAR) describe a 2021 marketplace that continues to improve.
- 2020 Annual Sale Results. “Existing-home sales totaled 5.64 million in 2020, up 5.6% from 2019 and the most since before the Great Recession. The median existing home sales price was $309,800, up 12.9% from one year ago.”
- January 2021. “Existing-home sales continued to increase in January to a seasonally-adjusted annual rate of 6.69 million, up 0.6% from the prior month and 23.7% from one year ago. The median existing-home sales price rose to $303,900, 14.1% higher from one year ago.”
- February 2021. “The median existing-home sales price rose to $313,000, 15.8% higher from one year ago, with all regions posting double-digit price gains.”
- March 2021. “The median existing-home price2 for all housing types in March was $329,100, up 17.2% from March 2020 ($280,700), as prices increased in every region. March’s national price jump marks 109 straight months of year-over-year gains.
Notice the pattern? Twelve-month prices were up 12.9% in 2020, 14.1% in January, 15.8% in February, and 17.2% in March.
We all like good news and for most property owners that means rising home prices, but there comes a point where there are fewer and fewer buyers with enough income to sustain sharply-rising values. Affordability becomes an issue and that’s when price increases begin to soften.
It turns out that wages increased 6.9% in 2020 according to the Economic Policy Institute (EPI). High, but nowhere close to the price increases we’ve been seeing.
The 2020 wage increase is not real. Most wage earners did not get such additional money. Instead, the big number is the by-product of COVID economics and statistical sleight-of-hand.
As EPI explains, the annual number is strangely high because “wages grew largely because more than 80% of the 9.6 million net jobs lost in 2020 were jobs held by wage earners in the bottom 25% of the wage distribution. The exit of 7.9 million low-wage workers from the