Home prices are rising across the country and the prices for new homes in particular may increase significantly in the near future. Economist Bradley Hunter with Metrostudy told The Chicago Tribune that he predicts newly-built homes could see a 9 percent increase in price by the end of the year. 

“Here's what's happening: Land values are going up very fast right now in prime locations, what we call the ‘A’ locations,” Hunter explains. “In the best A (and B) markets, we expect prices to rise by 11 percent to 15 percent. Builders are desperate to buy lots, which in some cases are 30 percent to 50 percent higher than last year.”

The “A” and “B” locations, as Hunter refers to them, tend to be closer to the center city—near jobs, retail, and services. 

Hunter does see some relief for those looking to buy in the coming year, however.

“I think the builders are going to have to come to grips with a new affordability mentality,” Hunter says. “They're going to have to reckon with these forces — rising mortgage interest rates, mainly — that are going to limit how much they can raise prices. That's why 10 percent to 15 percent price increases will become 3 to 6 percent pretty soon — in six to 12 months. It depends on when mortgage rates move higher. If they go up, say, by 2 percent or 3 percent, it will have a noticeable impact on what people can afford and therefore on what builders are offering.”

Source: The Chicago Tribune