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Why is Real Estate so Expensive in the US?

In a study by Redfin, it’s been reported that home prices increased about 15% over the last year. This trend of expensive real estate properties is expected to continue from here on out. This issue is merely a consequence of the supply and demand problem that we’re facing today. Due to the pandemic, the interest rate dropped to 3% as an attempt to help the economy. 


Because of lower interest rates and the desire of many Americans to leave their apartments to move to bigger spaces, the demand for homes rapidly rose. However, the economy’s instability has caused many sellers to lie low. As a result, the real estate industry now has more buyers than sellers. Thus, an increase in the housing prices. 

Causes of rising house prices today

There are other factors that have impacted the costs of housing in recent years. 

Increased local zoning laws

The local zoning laws are critical for public safety. Unfortunately, the added safety causes an increase in prices for the houses in the area. The local zoning law is also the typical reason why there’s limited housing supply in a given real estate community. There are zoning laws that specify the location where houses can be built and there is a zoning law that decreases the housing density of the specific community. 

Rising construction costs

Even before the pandemic hit, there’s been some difficulty in hiring contractors because of the increased cost of labor. That and the cost of existing tariffs on construction materials greatly contribute to the price of real estate today. Metal and finished materials such as wall panels, flooring, and flooring all hiked up from 10% to 25%. Before that even, there was a Canadian tariff on lumber that just kept on increasing. 

Low-interest rate

As mentioned earlier, the lower interest rates on mortgages continue to convince people to change their addresses from apartment complexes to gated homes. Due to this decreased interest, more people can now afford to buy homes thus flooding the market with needs. 


Expensive real estate impacts investors in many ways. For one, they now have to pay more if they want to invest. On the upside, investors who are now at their exit strategy phase will have more returns due to the increased housing prices. The value of their properties may have doubled or tripled amidst the pandemic. 


Homeownership is often the foundation of many American Dreams. In fact, it’s considered a lifetime achievement. There are many subsidies and financial support for those who want to own their homes as well. However, the increased housing cost in the United States makes it a challenge for many families to complete their American Dreams. So, keep an eye on the various financing options available for you. 


Regardless if you’re a buyer looking for a home or an investor looking out to sell, you need to plan ahead. Your interest in real estate must be based on recent financial statistics.  


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