Home prices are increasing as record low interest rates draw buyers into a real estate market short of affordable houses.
Overall, the median sale price of the most affordable third of homes increased 5.5% during the 12 week period ending May 31, according to a report published Friday by brokerage Redfin, with some cities experiencing double-digit increases. Newark, New Jersey saw home prices jump the most, up 14.7% in the most affordable segment, followed by Philadelphia with a 13.6% increase and Detroit at 13.3%.
“The severe shortage of affordable homes that we’ve been grappling with for years is now being exacerbated by an increase in the number of buyers who are in search of lower-cost houses,” said Taylor Marr, lead economist for Redfin. Adding, “prices will likely continue to grow faster in the more affordable segment of the market for at least the next few years given this lack of supply.”
Prices also increased for the highest-priced homes, although at a slower pace. According to Redfin, the median price of the most expensive homes increased 2%. In contrast to the supply of affordable homes, the inventory of higher-priced homes has actually increased in line with expected seasonal growth despite the coronavirus pandemic.