Everywhere around the US, home prices are rising dramatically and at a rapid pace. Nationwide average home prices have increased by 30 percent since they bottomed in 2012. They are now just 4.5 percent lesser than their 2006 bubble highs, according to data from Robert Shiller, an economist from Yale.
Prices of homes in San Francisco are up by 79.2 percent since 2009. Atlanta homes are 53 percent more expensive. Phoenix home prices have increased by 47.1 percent. Denver homes became more expensive by 42.6 percent. Los Angeles homes have seen a price increase of 49.7. The last time the housing market has experienced gains as massive was during the 2000s bubble.
According to industry analysts, one of the major reasons why home prices are surging in the US is the influx of big developers in the housing market. In the past, home construction was dominated by mom-and-pop construction crews which work only with single-home projects.
Now, small contractors have been replaced by corporate builders who work with huge developments that involve hundreds of homes. This allows developers to limit the supply of new homes to maximize their profits and with many developers going out of business during the recession, the existing corporate builders have a tighter control on housing supply. Additionally, developers are now focusing on building high-end homes where profit margins are the biggest.
Moreover, experts explained that new homes would require the construction of new schools, reservoirs, roads, sewers and other developments that cost cities and counties upfront money that they do not have or cannot borrow because of the recession. So, what cities and counties do is they restrict new-home permits.
For instance, in Boston, the Boston Globe recently reported that "the state is building only about half the housing it did in 2005" because the "cities and towns... continue to either oppose new housing or accept it only reluctantly, allowing just enough to meet state affordable housing mandates and imposing restrictions that limit the types of homes that can be built."
