Throughout 2021, the average sales price of a home rose 16%, reports Forbes, though some metro areas like Boise and Austin reported gains over 30%. In comparison, home prices rise no more than 5% a year on average, and even during the 2005 housing bubble, price growth stayed under 12%.
Market experts predict that current housing prices will stagnate for the coming year, though some regions with precarious price to income ratios could see a sudden drop depending on market conditions.
Higher home prices aren't necessarily a bad thing: They spur new construction, provide business for realtors and mortgage companies, create construction loans and home equity loans for banks, and increase the wealth of homeowners , who in turn produce more spending that benefits the economy.
The problem with rising home prices comes when they rise too fast, when they reach levels that are out of sync with economic reality, after which they crash back to their original value or even lower. After the 2005 bubble, average home prices began a four year slide that left them 20% lower, bankrupting homeowners, home builders and bankers in the process.
Advertisement
Related Stories
Housing Markets
10 Metros Where Luxury Home Prices Have Risen the Least
You can still find a bargain—relative to other markets—on high-end homes in these locales, which have seen less luxury price growth
Housing Markets
These Housing Markets Are Seeing Higher Than Average Price Increases
The majority of metros where housing costs increased fastest are in the Northeast
Housing Markets
10 Housing Markets With the Highest Rate of Investor Homeownership
Cities with the highest share of investor homeownership are also the places seeing a slowdown in the market due to high costs