Record Home Market Prices Supply Shortage Largely Result Of Pandemic Era Federal Policy

The Surprising Impact of Pandemic-Era Federal Policy on the Housing Market

How the CARES Act and Other Measures Contributed to Today's Challenges

Record Home Prices

The median home price in the United States hit a record high of $428,700 in June 2023, according to the National Association of Realtors. This is a 14.2% increase from June 2022. Several factors have contributed to this surge in prices, including low interest rates, a shortage of homes for sale, and increased demand from buyers.

Supply Shortage

The supply of homes for sale has been declining for years, and the pandemic has only exacerbated the problem. In June 2023, there were just 1.1 months of housing inventory on the market, according to the National Association of Realtors. This means that it would take just over a month to sell all of the homes currently listed for sale at the current pace of sales.

The supply shortage is due to a number of factors, including the rising cost of land and construction, zoning restrictions, and NIMBYism (not in my backyard). The pandemic has also made it more difficult to build new homes due to labor shortages and supply chain disruptions.

Pandemic-Era Federal Policy

The CARES Act, which was passed in March 2020, included a number of provisions that helped to boost the housing market.

• The act provided for a temporary reduction in the mortgage interest deduction limit, which made it more affordable for people to buy homes.
• The act also included a provision that allowed homeowners to defer their mortgage payments for up to six months, which helped to prevent foreclosures.
• Additionally, the Federal Reserve lowered interest rates to historic lows, which made it even more affordable for people to borrow money to buy homes.

These measures helped to stimulate demand for housing and contributed to the rising prices and supply shortage that we are seeing today.

Conclusion

The pandemic has had a significant impact on the housing market, and the CARES Act and other federal policies have played a major role in the challenges that we are seeing today. It is important to understand the causes of these challenges so that we can develop policies to address them and ensure that everyone has access to affordable housing.