House prices grew in most states in the U.S. between the second quarter of 2022 and the second quarter of 2023. Nevertheless, prices declined in eight states, as well as in the District of Columbia. The annual appreciation for single-family housing in the U.S. was three percent, while in Maine and Connecticut - the states where homes appreciated the most - this percentage stood at nearly eight percent.
How have home prices developed in recent years?
Though the growth of house prices has been going strong for years, in 2021, the increase was exceptionally high for both new and existing homes. To a certain extent, the spike in home buying can be attributed to the record-low interest rates at that time. With the federal funds effective rate and mortgage rates going up, however, the market cooled down.
Why are house prices growing?
Though housing demand has been growing, supply has been a limiting factor. How many homes enter the housing market depends on the construction output, whereas the availability of existing homes for purchase depends on many other factors, such as the willingness of owners to sell. Furthermore, growing investor appetite in the housing sector means that prospective homebuyers have some extra competition to worry about. In certain metros, for example, the share of homes bought by investors exceeded 20 percent in 2021.