Why the Housing Market Is Getting More Expensive — Fast
If you’ve been thinking about buying a home in San Diego, you’ve probably noticed that prices aren’t showing any signs of cooling off. It’s not just a local trend—homeownership across the U.S. is becoming more expensive due to a combination of rising mortgage rates, construction costs, labor shortages, and demographic shifts.
Let’s break down why buying a home is tougher than ever and why this might continue for the foreseeable future.
1. Mortgage Rates Are on the Rise
Most homebuyers rely on a mortgage—and mortgage rates are tied closely to 10-year Treasury yields. With increased government deficit spending and greater demand for Treasury bonds, borrowing costs are climbing. This means higher monthly payments, even if home prices stay the same (spoiler: they aren’t).
2. The Retirement of Baby Boomers Is Changing the Game
Historically, the generation nearing retirement provides a lot of capital to the economy. But as of early this year, over two-thirds of Baby Boomers have officially retired. They’re moving their money out of stocks and bonds and into safer options like cash and Treasury bills, tightening up the capital markets and increasing interest rates across the board—including mortgages.
3. Construction Labor Is Harder to Find
One often-overlooked factor driving up home costs is labor. Many construction jobs have been filled by migrant workers, and new immigration policies have dramatically reduced that labor pool. Fewer workers = slower builds = higher costs for new homes.
4. Building Materials Are More Expensive
Tariffs and global supply issues have driven up the cost of core materials like steel, aluminum, copper, and wood—key components in homebuilding. Even if builders want to ramp up production, their costs are higher than ever.
5. Insurance Premiums Are Increasing Too
Building your home isn’t the only thing that’s gotten more expensive—protecting it has too. Insurance companies are adjusting premiums upward by 20% to 30% in some cases, due to rising rebuild costs. Whether it’s storm damage, fire, or even basic repairs, everything costs more now.
6. Boomers Aren’t Downsizing Anymore
Previous generations tended to move into smaller homes, apartments, or assisted living as they aged. Today, many Boomers are choosing to age in place. This means fewer homes are hitting the market, and inventory is staying tight—especially in single-family housing.
7. First-Time Buyers Are Being Squeezed
If you’re a Millennial or Gen Z buyer trying to break into the market, you’re dealing with:
- Higher home prices
- Increased mortgage rates
- Limited inventory
- Rising insurance and construction costs
It’s a tough time to be entering the market—especially when compared to previous generations who bought when prices were lower and borrowing was cheap.
So What Can You Do?
If you already own a home, you’re likely in a good spot. Inflation can reduce the real value of your mortgage over time, and your home is likely gaining value. But if you’re looking to buy, now might be the time to seriously consider locking in a purchase before costs climb even more.
San Diego’s housing market is uniquely competitive, but the underlying pressures discussed here affect the entire country. Whether you’re a local buyer, seller, or just exploring the market, staying informed about these macroeconomic trends is crucial.
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