"Among other things, this reflects the parenthood phase during prime age , the separation of adult children from the household, divorce and the heightened possibility of eventually losing a life partner to death," he wrote. At the same time, there's not enough available housing in the U.S. to supply the demand from people looking to move into their own homes, he noted. That's creating pressure on prices and partly explains this year's gravity-defying prices.
The median sales price for existing homes rose 1.9% in July to $406,700 compared with a year earlier, although prices dipped slightly in the beginning of the year, according to data from the National Association of Realtors. That's an increase of 57% since January 2020, prior to the pandemic, when the median sales price for existing homes wasMillar predicts that demand for housing is likely to continue given the demographics of aging boomers.
"With overall housing shortages likely to prevail, we think risks to our forecasts for both housing prices and rents are to the upside, especially as the Fed enters its cutting cycle in late 2024," Millar concluded. Of course, not everyone agrees with Millar's rationale, with Capital Economics forecasting that housing demand may be weak in the next few months.
"With affordability stretched and the economy slowing, housing-market activity is expected to remain weak over the coming quarters," Imogen Pattison, assistant economist with Capital Economics, said in a new report."While we expect house prices to lose some of their recent momentum, the worst of the correction appears to have passed and we don't expect further sustained declines.