On top of rising borrowing costs, home prices are also the highest they’ve been in years as demand far outpaces the number of homes on the market. According to Realtor.com, the overall inventory of homes has decreased for 42 consecutive months. The number of available starter homes was down 14.2 percent compared to the same time last year, according to Trulia. Meanwhile, housing starts (construction that started on a new home) aren’t keeping pace with demand.
The basics of economics have kicked in: When demand outpaces supply, prices rise. The scarcity of homes for sale has buyers competing fiercely for what’s left on the market, and the bidding wars that often ensue inflate sale prices further.
Some of the hottest housing markets in the past few years — Seattle, Las Vegas and San Jose — have posted double-digit annual home price increases. Nationally, the median home price in February was up 5.9 percent from a year earlier.