The booming housing market helped stave off economic collapse in 2020. But soaring prices are starting to worry policymakers, who fear the market could lock a generation of would-be buyers out of homeownership.
Home prices in January — typically a slow month for the market — were up 14 percent over the same month the previous year, while sales jumped 24 percent, despite an unemployment rate that was almost twice as high. Demand for existing homes is so strong that the average residence is on the market for just three weeks, and inventory is at a record low after seeing its steepest drop last year since the data was first tracked in 1999.
It all threatens to freeze broad swaths of the population out of the market, leaving millions of Americans in a less secure financial position, widening the racial wealth gap and forcing millennials, already lagging previous generations in building wealth and forming families, to fall even further behind.
“The dream of homeownership is out of reach for so many working people,” said Senate Banking Chair Sherrod Brown (D-Ohio). “Rising home prices and flat wages means that many families, especially families of color, may never be able to afford their first home.”
Brown, who insists on calling his panel the “Senate Banking and Housing Committee,” vowed that these issues will be a top priority in the months ahead as the country struggles to recover from the pandemic-induced recession. Among other things, he said he plans to work with the Biden administration to address the rising cost of housing and expand access to homeownership “so that more families can rent and own homes in inclusive communities.”
The last time the U.S. saw such skyrocketing home prices, the ensuing crash brought down the global economy. Most industry analysts say the current boom is not a “bubble” akin to that frenzy of more than a decade ago, which led to the financial crisis.