This week’s chart reveals a remarkable little fact about the current state of the U.S. housing market: new homes are just as affordable as old ones.
Typically, as you can see on the chart, new homes are much more expensive than existing ones already on the market. But right now, the median home price in America for new and old homes is about $416,000.
Why? It probably has to do with the fact that most homeowners with a mortgage have locked in a rate below 4%, making them less inclined to move and take on a new mortgage with a rate close to 7%. As a result, the number of existing homes on the market is at an extremely low level, which has so far kept new construction from falling as much as it has in previous years.
The bottom line? Recent estimates show that the US economy continued to chug along in the second quarter, with real GDP growth bouncing around 2% year-over-year. While new home investment has not been a source of that growth, it hasn’t necessarily been a drag either, as many would have expected. This is likely a good sign for the economy and risk-asset performance going forward, assuming it holds.
This is intended for informational purposes only and should not be used as the primary basis for an investment decision. Consult an advisor for your personal situation.
Indices mentioned are unmanaged, do not incur fees, and cannot be invested into directly.
Past performance does not guarantee future results.