As home sales slide and mortgage rates rise, home prices in 70% of 185 measured metros saw a double digit annual increase in Q1, according to the newest data from the National Association of Realtors (NAR), up from 66% in the previous quarter.

The Southern region accounted for 45% of home sales in Q1, and experienced a 20.1% increase in annual home prices (compared to 14.3% just the quarter prior). Home prices in the Midwest jumped 8.5% annually in Q1, while The Northeast rose 6.7%, and the West increased 5.9%.

The median sales price of a single family existing home has now hit an astonishing $368,200.

“Prices throughout the country have surged for the better part of two years, including in the first quarter of 2022,” said NAR Chief Economist, Dr. Lawrence Yun. “Given the extremely low inventory, we’re unlikely to see price declines, but appreciation should slow in the coming months.”

Yun expects supply levels to improve, and for “more pullback in housing demand as mortgage rates take a heavier toll on affordability,” given that “there are no indications that rates will ease anytime soon.”

At first blush, price appreciation sounds lovely to anyone that owns a home, given that it is the largest investment most Americans will ever make.

But regarding today’s report, several homeowners told us that they now feel trapped, and that if they sold their current home, even if they purchased a new house at that same price, they would likely have to downgrade.

Affordability is an ongoing problem weighing down the housing sector. NAR reports that the monthly mortgage payment on a typical existing single-family home with a 20% down payment rose to $1,383 (up $319, or 30%, from one year ago). Families now typically spend 18.7% of their income on mortgage payments (but only spent 14.2% one year ago).

“Declining affordability is always the most problematic to first-time buyers, who have no home to leverage, and it remains challenging for moderate-income potential buyers, as well,” Dr. Yun observed.

As coronavirus numbers dwindle and some officials begin calling for a fourth COVID-19 shot, more and more people previously working at home after being kicked out of shuttered office buildings are returning to the bullpen.

The National Association of Realtors reports that more than 80% of metro areas in the United States have seen an increase in in-person working.

Boston saw the largest office occupancy growth over the past year. Chicago, New York and Washington, D.C. have the most open space.

NAR researcher Scholastica Cororaton says office occupancy is also increasing in areas with a big tech presence. San Jose, San Diego, San Francisco and Seattle lead those areas.

“The rising occupancy in these tech metro areas indicates that tech companies are contributing to the demand for office space,” Cororaton wrote. “Even as nationally, 45% of mathematical and computer workers work from home for at least some part of the time.”

The way companies are returning to work vary and are sparking anger. For instance, Google employees must now be in the office three days a week. On the other hand, Apple begins its return to office plan next week. It starts with employees coming back one day a week which will eventually grow to two days and then three days a week. Apple employees have revolted against the idea and are have threatened to quit.

Many in leadership are pleased with the return to the office to boost productivity and collaboration. However, employees are finding they’re showing up in person to just log in to Zoom again, which has stirred up even more frustration.

On top of the redundancy of work that could be done at home, a study shows only 3% of white-collar employees want to work in the office all week. 86% want to stay home for at least a few days.

Plus, the return to the office drives up costs, with gas prices seeing soaring and inflation at a 40-year-high.

Since the second half of 2021, 30 million square feet of office space has been taken up, however, about 100 million square feet remain.

NAR reports filling that space up again could take through the end of 2024.

We’ve written for years about millennials and their reluctance to purchase homes, especially in the wake of the pandemic. Financial hesitancy is a trait long associated with millennials, but according to Hana Ben-Shabat, Gen Z is making a definitive push for homeownership where the prior generation has stagnated.

Hana Ben-Shabat is the author of Gen Z 360: Preparing for the Inevitable Change in Culture, Work, and Commerce, and she founded Gen Z Planet, a firm that “[helps] brands prepare and adjust to the changes that Generation Z is bringing to the workplace and the consumer market.”

Her insight is clearly valuable, making her assertion that Gen Z is more likely to buy homes less speculation and more prophecy.

“Considering their focus on securing their future, home ownership is a piece of the puzzle,” Ben-Shabat says. In a related survey, she notes that 87% of Gen Z participants expressed interest in owning a home sometime in the future; only 63% of millennials echoed that sentiment.

Gen Z participants also had a stronger inclination toward viewing homeownership as a financially smart decision rather than a burden.

Gen Z’s open-mindedness toward purchasing homes may seem surprising at first glance. Ben-Shabat acknowledges the financial hardships placed on this generation, and posits that, having seen millennials struggle with student debt and the recession of 2008, this generation has arguably more incentive to stay away from large investments.

But she also points out that Gen Z buyers are “determined to learn from the mistakes of others and secure their financial future as early as possible,” adding that they “benefited from a wave of consumer financial education that began after the housing crisis of 2008.”

This makes for a generation that is both clear and educated regarding their financial goals and how to achieve them.

It’s also worth noting, as Ben-Shabat does, that millennials have a more tenuous grasp of DIY culture and the financial decisions that accompany it than their Generation Z counterparts. As “digital natives,” Gen Z buyers don’t object as strongly to purchasing starter homes and renovating; millennials, by contrast, find themselves purchasing more expensive properties that are “ready to move in” due to waiting an extended time before shifting toward homeownership.

Ben-Shabat’s observations foreshadow an increased market shift toward Generation Z ownership, especially in smaller, more affordable locations. As for the economic ramifications of the paradigm change, only time (and Ben-Shabat’s website) will tell.