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One of the dominant economic stories since the start of the COVID-19 pandemic has been the fiercely competitive housing market. The median selling price of a home in the United States topped $400,000 for the first time in 2021 amid aggressive bids and bidding wars in markets across the country.
Today’s housing market challenges are the result of a powerful combination of supply and demand factors. The United States has underbuilt housing supply for years, with mortgage lender Freddie Mac estimating that a shortage of 3.8 million homes starting in 2020. The COVID-19 pandemic has brought additional struggles, such as supply chain constraints and labor shortages have increased costs and made it difficult for builders to keep pace. On the demand side, millennials are in a peak period for home buying, and a string of years of low mortgage interest rates has drawn many buyers into the market. More recently, the COVID-19 pandemic has brought salary increases for many professions and greater shifts to remote working which have increased the demand for larger homes.
The result has been a hypercompetitive housing market that has produced a dramatic spike in home prices since the start of 2020. Prior to the onset of the pandemic, the median selling price of a home in the United States was $329,000. . In the third quarter of 2021, the median sale price peaked at $411,200, before declining slightly to $408,100 in the final months of 2021. With more than half of homes now selling above $400,000, fewer options are available for lower prices. income or first-time buyers, and current homeowners looking to upgrade to bigger or nicer homes must pay a higher price to do so.