US home prices have surged 47% since the start of 2020

Home prices rising at faster pace than the 1990s, 2010s

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Housing must solve its supply problem to stop rising prices: Mitch Roschelle

Madison Ventures managing director Mitch Roschelle analyzes the housing market and reveals some of the best places to live outside of big cities on 'The Big Money Show.'

Home prices have surged 47.1% since the start of 2020, easily outstripping the gains seen in recent decades.

That's according to a recent analysis by ResiClub of the Case-Shiller National Home Price Index, which showed that house prices in the 1990s and 2010s grew a respective 30.1% and 44.7%.

On top of that, home price growth so far this decade is on the verge of surpassing all the growth seen in the 2000s. During that time period, housing prices skyrocketed 47.3%, including an 80% spike before the 2007 housing market crash.

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Homes in the Issaquah Highlands area of Issaquah, Washington on Tuesday, April 16, 2024. (David Ryder/Bloomberg via Getty Images / Getty Images)

There are a number of driving forces behind the spike in prices.

Years of underbuilding fueled a shortage of homes in the country, a problem that was later exacerbated by the rapid rise in mortgage rates and expensive construction materials.

Available home supply remains down a stunning 34.3% from the typical amount before the COVID-19 pandemic began in early 2020, according to a separate report published by Realtor.com.

Higher mortgage rates over the past three years have also created a "golden handcuff" effect in the housing market. Sellers who locked in a record-low mortgage rate of 3% or less during the pandemic began have been reluctant to sell, limiting supply further and leaving few options for eager would-be buyers.

WHY CAN'T YOU FIND A HOME FOR SALE?

Economists predict that mortgage rates will remain elevated in 2024 and that they will only begin to fall once the Federal Reserve starts cutting rates. Even then, rates are unlikely to return to the lows seen during the pandemic. On top of that, investors are growing skeptical about the odds of a Fed rate hike this year given the string of hotter-than-expected inflation reports at the beginning of the year.

Photo of home for sale in Huntington, New York on August 5, 2020. (Thomas A. Ferrara/Newsday RM via Getty Images / Getty Images)

Mortgage buyer Freddie Mac said Thursday that the average rate on a 30-year loan last week fell to 7.09%. While that is down from a peak of 7.79% in the fall of 2023, it remains sharply higher than the pandemic-era lows of just 3%.

Most homeowners say they are nearly twice as willing to sell their home if their mortgage rate is 5% or higher, according to a separate Zillow survey. Currently, about 80% of mortgage holders have a rate below 5%.

A separate survey conducted by Redfin shows the combination of steep mortgage rates and elevated home prices has pushed the median monthly housing payment to a record $2,775 — an 11% increase from the same time last year.

"Market conditions for homebuyers remain challenging with few homes listed and costs for ownership still climbing," said Ben Ayers, Nationwide senior economist. "Despite strong fundamentals for demand from demographics and a strong labor market, many first-time buyers are being shut out of the market by elevated financing rates and rising prices."