A fresh datapoint has emerged showing just how red-hot America’s housing market has been as the pandemic’s work-from-home revolution sent people on a buying spree that collided with slim supply to send the value of the U.S. housing stock soaring.
The total value of homes in the United States surged by $6.9 trillion in 2021, according to a Jan. 27 analysis by Zillow, easily topping any prior year on record.
“Even in the context of a year in which several housing records were topped, the scale of the housing market’s growth in 2021 is eye-popping,” Zillow senior economist Jeff Tucker said in a statement.
Besides home prices bursting to record highs in 2021, sales of previously-owned homes—which account for around 90 percent of all residential home sales in the United States—totaled 6.12 million that year, according to the National Association of Realtors (NAR). Last year’s buying frenzy sent the inventory of unsold existing homes to an all-time low of 910,000, or around 1.8 months’ worth of stock at the current selling pace.
A shortage of inventory in the previously-owned housing market has given a boost to new home sales, which rose 11.9 percent to a seasonally adjusted annual rate of 811,000 units last month, the highest level in nine months.
Zillow economists expect 2022 to be another strong year for housing, though challenging for new entrants who may increasingly find it hard to find affordable starter homes.
“Skyrocketing home values may be celebrated by longtime homeowners, but are daunting for those trying to buy their first home. This year is likely to be less competitive for buyers, but it will continue to be a sellers market,” Tucker predicted.
Home prices have surged in the face of strong buyer demand, though recent months have seen some easing. A house price index compiled by the Federal Housing Finance Agency (FHFA) showed a 17.5 percent annual rise in U.S. home prices between November 2020 and November 2021, though the end of the year brought a slight downshift.
“House price levels remained elevated in November, but the data indicate a pivot,” Will Doerner, supervisory economist in FHFA’s Division of Research and Statistics, said in a statement.
“The last four months reflect average gains of 1.0 percentage point, down from the larger prior changes during the spring and summer months,” Doerner said.
“This new trend is a welcome shift but still twice the monthly average we have seen in the last 20 years, which echoes concerns about access and affordability in housing markets,” he added.
Another data point that suggests some cooling of sizzling house prices is pending home sales, which slipped in November, according to a recent NAR report.
Lawrence Yun, NAR’s chief economist, said it wasn’t just inventory shortages putting a damper on sales, but more buyers recoiling from sticker shock.
“There was less pending home sales action this time around, which I would ascribe to low housing supply, but also to buyers being hesitant about home prices,” Yun said in a statement.
“While I expect neither a price reduction, nor another year of record-pace price gains, the market will see more inventory in 2022 and that will help some consumers with affordability,” he predicted.