Hot Housing Market: What’s Driving Up Home Prices Across the U.S.?
6 minute read
March 24, 2024


The trend of rising home prices in the U.S. began in 2020, largely due to the impacts of the COVID-19 pandemic.

Low-interest rates, a shift toward remote work, and changing housing needs continued to drive demand higher and higher in 2021.

Today, we are still facing the economic impacts of the pandemic, but consumer priorities have shifted and the nation is experiencing a different interest rate environment.

In this article, we’ll explore the contributing factors to sustained high home prices in the U.S., including strategies for moving ahead with your investments despite the obstacles.

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Inflation, interest rates, and the Federal Reserve

Pandemic-related disruptions led to a significant uptick in inflation rates beginning in 2020.

Rising inflation rates have a direct impact on the cost of living, including housing prices. 

This effect is compounded by increased costs for construction materials, labor, and land, which further pushes up home prices.

Effects of the Federal Reserve’s policies

The Federal Reserve sets interest rates that influence borrowing costs.

The Fed’s actions are aimed at balancing economic growth with inflation control, but these policies impact the affordability and accessibility of housing. 

Lower interest rates make borrowing cheaper, increasing the demand for homes as more people can afford mortgages.

Higher interest rates typically decrease demand. However, in a market with strong underlying demand and low inventory, the impact may not be as significant.

In 2020 and 2021, ultra-low interest rates made demand skyrocket.

In a higher-rate environment in 2024, there is still sustained demand because of a severe lack of home supply—which means home prices are not able to cool.

Supply and demand dynamics

One major contributing factor to sustained high home prices is the lack of home supply.

Today’s limited housing inventory is a result of the following:

  • High home demand
  • Current homeowners are reluctant to sell in a higher-rate environment
  • New home construction can’t keep up with demand due to labor shortages, regulatory challenges, increasing costs, and supply chain disruptions

New construction is expected to increase throughout 2024.

Societal and demographic shifts

During and post-pandemic, homebuyer preferences shifted to

  • Larger living spaces 
  • Home offices to accommodate remote work
  • Outdoor space
  • Smart home technology such as smart thermostats, lighting, and security systems

Due to the continued economic uncertainties in 2024, buyers today are primarily seeking flexibility and affordability.

The search for more space and affordability has led many homebuyers to rural and suburban areas, which has led to price surges in areas that are typically more affordable.

Governmental and regulatory influences

The following government policies and regulatory influences can contribute to home affordability and availability:

  • Restrictions on land use impact affordability
  • Updated building codes contribute to higher construction costs
  • Federal Reserve rate adjustments indirectly influence mortgage rates
  • Urban renewal and development projects can increase property values

As the market continues to evolve, there are continued debates as to the best ways to ensure an accessible housing market for all Americans.

What’s next for home prices?

Economists and analysts predict the housing market will stabilize throughout 2024 and 2025.

The direction of mortgage rates depends on numerous economic factors, including Federal Reserve actions.

However, continued efforts to ramp up new construction and address supply chain issues will also help bring more balance to the market.

Real estate investors can play a role in bringing home supply to communities by developing new properties or renovating existing homes.

An investor’s role in the current housing market

High home prices impact a real estate investor’s overall costs and profit margins, but there are opportunities available in any market.

Here are some tips for investors looking to make informed decisions in challenging markets.

Focus on the long-term

Perform due diligence to find areas with development potential, a growing population, and a strong economy.

This perspective helps shift the focus from short-term gains to long-term growth potential.

Diversify your portfolio

A strong investment profile contains a mix of property types and locations, so a downturn in one market won’t be as detrimental.

Park Place Finance lends nationwide and can be your partner in a variety of deals across the country.

Lock in low rates

When interest rates dip, take advantage of the opportunity.

Private lenders can fund deals in a matter of days or weeks, so you can quickly secure the right property at the ideal time.

Consider your range of investment options

Real estate investors can serve a powerful role in local real estate markets by renovating existing properties, transforming properties into long-term rentals, or even constructing new builds from the ground up.

This mix of investment types will create a strong portfolio that can weather any economic storm—and provide much-needed housing options for communities.

Build relationships with other professionals

Two crucial real estate partnerships: Real estate agents and private lenders.

A private lender that lends nationwide can help you quickly fund deals anywhere and anytime you find the right opportunity.

Relationships with reputable local real estate agents across the country will ensure you hear about a great opportunity as soon as it pops up on the market.

Investment loan options in today’s market

The ideal financing option for real estate investors is hard money lending.

Hard money loans are offered by private lenders experienced in real estate.

The major benefits of hard money lending for investors include:

  • Fast approval and financing
  • Asset-based lending focused on the collateral rather than the borrower’s creditworthiness
  • Flexible terms that are customized to the project type
  • Short-term and long-term financing options
  • Typically no prepayment penalties
  • Deal-focused approach

Real estate investors can build real partnerships with hard money lenders for years of lucrative real estate deals to come.

Connect with Park Place Finance today

Park Place Finance is a direct hard money lender with in-house capital.

When you choose to work with us, you can rest assured that a team of real people will be dedicated to funding your deal as quickly as possible.

We offer the following loan options to our borrowers:

  • Fix-and-flip loans
  • Debt service coverage ratio (DSCR) loans
  • Bridge loans
  • Ground-up construction loans

Our team can close on deals within a matter of days or weeks, and every borrower has access to a dedicated account executive for current and future deals.

Start here to unlock your rate quote, or call us at (866) 407-1599 to discuss your unique financing needs.


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