Home prices have been on the rise in the United States, with the pace of new home sales rising to highs not seen since 2007. Record-low mortgage interest rates, heightened demand, and the Covid-19 pandemic have all contributed and continued to support the boom in the United States housing market, making real estate one of the most resilient sectors in the country since 2020. Whether you are buying or selling, here are the home sales situation you need to know.
Mortgage Rates Is Expected to Remain Low
You can’t talk about what is happening in the home sales market without talking about interest rates. The Federal Reserve in early 2020 decided to reduce interest rates so as to stave off an economic disaster. The last time the Central Bank made such a move was in 2008 during the financial crisis. Subsequently, investors pulled out of the stock market due to the uncertainty of the looming global health crisis.
All these happenings ensued the lowest mortgage rates we have ever seen. With the low mortgage interest rates, savvy real estate investors quickly moved to lock them in. And the increase in demand depleted the already thin real estate inventory and shot prices to new highs. Mortgage rates have started increasing and are expected to continue rising through 2021. This is expected to price out some home buyers as well as reduce the double-digit price.
There Are Fewer Homes on The Market
Before the pandemic upended the world, the country was already suffering from a housing shortage. There are about 1 million active listings at the beginning of the year, but by April, the number started plunging as home buyers purchase whatever inventory is available. Meanwhile, sellers, particularly older homeowners don’t want to put their houses on the market and have strangers in their houses during the Covid-19 pandemic. The number of homes on the market was almost halved from where it was in 2020.
Of course, sellers are usually buyers too, and they don’t want to sell until they get another house to live in. And there is no enough inventory for them to find new homes. So, even if these people want to sell their houses to take advantage of the current housing market, they are mostly stuck where they are.
Homebuilders Can’t Keep Up with Demand
Homebuilders have struggled to meet up with construction on new homes, especially the popular single-family models. A limited land and skill labor, soaring building materials costs, and unwieldy laws have stood in the way of more new homes coming into the market. In order to keep up with the housing market demand, homebuilders began ramping up new construction starting in April. But even with the jump in construction, it is not enough to sustain demand.
Home Prices Will Continue to Rise
Prices of homes had already been rising over the past few years. But in recent times, things are moving at an accelerated pace. And while the surge in the median listing price is a boon for home sellers, that kind of sudden rise hurt home buyers whose incomes are not growing at the same pace. In the end, home sellers will continue to have the upper hand in the US housing market in 2021. As the demand for homes remains strong and with limited inventory, the prices of houses are expected to reach newer highs.
Demand for homes is currently very strong and looks to remain so for the foreseeable future. Whether you are buying or selling a home, you can take advantage of the current trends in the housing market.