The median home price just crossed $400,000 for the first time

The median home price just crossed $400,000 for the first time

 the median home price in the United States topped $400,000 for the first time.

In the last three months of this year, the median home price was $404.700, up about 13% since the third quarter of 2020, when the median sale price was $358.700.

Although it is an eye-catching number, the market has been hot lately, and the lack of inventory and high demand means that housing prices will rise.

According to a recent note from Goldman Sachs, home prices could rise another 16% by the end of next year. Goldman economist Jan Hatzius noted that the housing shortage might last longer than all the pandemic shortages, and a crash is highly unlikely.

Home prices rise due to housing shortages

The pandemic has seen lower mortgage rates, people fleeing from urban areas to suburbs, as well as younger workers buying their first homes.

According to Fannie Mae's latest forecast, median home prices are expected to rise 7.9% between Q4 2021 and Q4 2022.

A recent note from Morgan Stanley showed that the country needs up to 1.5 million homes to get back to normal and that the pace of real estate availability is three years behind.

"The housing shortage has contributed significantly to the record pace of home price increases we are currently seeing," Morgan Stanley strategists wrote in August. "While the magnitude of the shortfall described above means that we are unlikely to find ourselves with excess supply anytime shortly, the pace of supply contraction has slowed."

Other things make the housing market difficult to predict. Morgan Stanley noted that an increasing number of older Americans choose to age at home just as millennials are looking for homes. These demographic developments are occurring while the pandemic has led to building materials shortages and supply chain bottlenecks.

While nothing appears set to change significantly until the market cools - yet - Goldman Sachs' note said potential zoning changes in some compressed areas could allow more multi-family units to emerge to provide more supply. But, of course, these changes take time.

As Upwork Economist Adam Ozymec noted on Twitter, the new normal: "$400,000 home, $40,000 car, you name it."

Correction 10/28: An earlier version of this post reported annual growth of close to 20%. I was approaching 13%.