Hari Kishan

BENGALURU (Reuters). Despite a slowing in house prices in the United States, which will be half that of last year, increases in wage and consumer prices are still higher than in U.S. property prices. This is according to Reuters’ poll of analysts who believed affordability would decrease over the coming two to three decades.

The U.S. housing market is often viewed as the foundation of consumer confidence and financial well-being. It has also survived the economic downturn caused by the pandemic.

Property prices have risen at an alarming rate due to the ultra-low interest rates, and the initial demand from pandemics for larger accommodation that would allow them to set up home offices.

The S&P Case-Shiller index of 20 metropolitan areas has risen at a double-digit rate over the past 10 months, a pace the Nov. 17-Dec.6 poll of over 25 property analysts said would continue for the rest of the year to average at 16.8%.

According to poll, this was predicted to fall to 8.0% by 2022. The forecasts ranged from 3 to 15%.

Mark Vitner, senior economist at the University of Michigan, stated, “Overall, housing demand continues to be strong. However, there have been quite some developments that have raised some red lights about the overall health the housing market.” Wells Fargo (NYSE:).

“We expect new construction and sales to be moderated in 2023 because the majority of pent up demand has likely been fulfilled by then. Also, price appreciation should moderate.”

(GRAPHIC: Reuters poll graphic on the U.S. housing market outlook – https://fingfx.thomsonreuters.com/gfx/polling/dwpkrzaxzvm/U.S.%20housing%20graphic.png)

The strong housing demand is reflected in the fact that U.S. current home sales (which account for about 90% of U.S. sales) were projected to increase at an average rate of over 6 million units per year until 2022.

However, prices are unlikely to rise as a result of higher inflation in consumers and U.S. Federal Reserve’s recent efforts to loosen monetary policy before expected.

Lack of new supply is another major problem that has forced many buyers from the market. Only one-third is healthy inventory.

The biggest influence on the U.S. housing markets in the next year was attributed to supply restrictions (14) and higher rates (12) by all 27 analysts.

It’s all about the supply. Lawrence Yun of the National Association of Realtors, chief economist said that decreasing home supply will result in rising home prices above individuals’ income growth. “This will increase wealth inequality.”

This supply shortage, which is directly related to affordability, wasn’t expected to change anytime soon.

Nearly 80% of the analysts (22 of 28) answered an additional question and predicted that housing affordability would worsen in the coming two- to three years.

“Affordability becomes a major concern.” Brad Hunter, of Hunter Housing Economics, said that many people will lose the ability to purchase a house and they’ll be forced to rent.

A lot of millennials now rent single-family detached homes. Because they are now having children, they will need a house with good schools and a backyard.

(For additional stories, see the Reuters Quarterly Housing Market Polls: