Rising Rates and Prices Won't Doom the U.S. Housing Market
But more-affordable homes will be needed to realize millennials' ownership potential.
The housing market has been a bright spot for the U.S. economy during the pandemic, as demand for new and existing homes reached levels last seen during the mid-2000s housing boom. More time spent at home and more workplace flexibility have caused many households to re-evaluate their living situations, which has spurred demand for larger suburban homes. Record-low mortgage rates in 2020 and elevated personal savings from lower discretionary spending during the pandemic and government stimulus have facilitated more home purchases, while a limited supply of existing homes for sale has made new construction an attractive option for prospective buyers.
However, a supply/demand imbalance has caused home-price appreciation to far outpace wage growth, mortgage rates are back on the rise, and construction costs are higher, especially for lumber, which haven’t helped affordability. Even so, mortgage rates are still historically low, we expect high lumber prices to moderate, and homebuilders continue to increase production of entry-level homes that take less time to build and are more affordable. While affluent buyers were very active in 2020, more-affordable homes will be needed to realize the millennial generation’s homeownership potential.
Brian Bernard does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.