Rising Homeownership Costs Bolster Rental Housing Demand

Rising costs restrain prospective homebuyers as record demand among buyers for a limited supply of homes has driven the median price of an existing single-family home up 14.8 percent YoY. First-time buyers accounted for 33 percent of existing home purchases in January, up from 31 percent one month earlier. This record demand coupled with Higher construction costs has compressed inventory. The supply of existing homes for sale in January was down nearly 30 percent year over year. The inventory sat at a record low of 2.0 months of supply. A lack of existing homes available has more people in search of newly built homes. Lumber prices, however, jumped to a record high of over $1,000 per 1,000 board feet in the third week of February, and the costs of land, labor and other building materials are also climbing. These factors are placing further pressure on home prices. The median price of a new home in January sat at $345,600, up 4.9% YoY. Rising costs and weather delays pushed the percent of pre-sold homes that have not yet started construction to the highest level since 1973. Rental housing is historically favored as home prices rise as fewer households are able to quality for a mortgage or are outbid on home offers, further delaying the transition out of the rental market