_{SOURCE: fortunebuilders.com}

The truth behind why housing is getting pricier by the day 🏠

Many of us have wondered why buying a home seems like an unattainable goal. In this article, we break down the factors behind skyrocketing housing prices. Below are the main factors when asking why are houses so expensive:

1. Lower Interest Rates

One of the main reasons home prices have increased over time, especially in recent years, is low interest rates. 

2. Increase In Local Zoning Regulations

As you may already know, building and zoning regulations have come a long way since 1940. The changes in these laws have directly resulted in home price increases, particularly in urban areas. 

3. Higher Construction Costs

Not all construction materials are made in the U.S. and must often be imported from other countries.

4. Lower Builder Confidence

A more recent factor that contributes to the increase in housing prices is a decline in homebuilding.

5. Changing Demographics

Home prices have also risen as a result of the new generation of homebuyers: millennials. This group began buying property over the last several years, which resulted in an increased demand for houses. Most notably, millennial homebuyers are drawn to suburban or mixed-use areas.

6. Increase In Land Prices

Over time, population increases have resulted in less available land throughout the country.

7. Government Subsidies

As home prices have increased, the U.S. government has attempted to provide to ease the costs. While these homeownership programs have been extremely beneficial for some, they have also contributed to increased prices. The argument is that subsidies enable homebuyers to pay more for properties, thus pushing sellers to charge more.

8. Lower Supply

Steven Day Owner of SD Garage Doors, says that “despite the fact that various political and economic variables contribute to overpriced housing, the major effect of rising prices is that demand outnumbers supply. The housing market grew overcrowded with potential purchasers and an insufficient amount of houses to sell as a result of numerous banking institutions lending to people with terrible credit and allowing them to acquire property”.

9. Inflation

As a result of increased prices throughout the economy, the Fed has increased interest rates multiple times this year. Mortgage lenders respond by raising their own interest rates — which ripples throughout the housing market.

10. Wages

As prices have increased throughout the economy, wages have not been able to keep up. This unfortunate reality has led to a sharp decrease in affordability in housing prices, both for potential buyers and renters.

Share this article with a friend who’s struggling with the housing market!