The housing market in the United States is continuously experiencing growth and significant changes. Home buying and selling pricing trends keep on rising despite the tough economic times. Over the past several years, the real estate industry is witnessing a continuous increase in home prices. There is also a high demand for homes, with low inventory available. This is seen by the high number of homes being sold within a short period despite the escalating prices.
The overall housing trends have some in the industry worried, with many of them wondering if a possible housing market crash like the one in 2007 and 2008 will happen again. Let’s take a look at a few things that significantly impact the housing market including insufficient inventory, historically low interest rates, millennials buying homes and regulated lending practices.
Factors Driving the Current Housing Market
The escalating prices of homes in the market can be attributed to the fact that fewer homes are being listed in the market for sale. The global pandemic is not making things any better. Most homeowners are by all means distancing themselves from strangers who happen to be potential buyers. Open houses slowed during the pandemic with many Realtors offering virtual open houses through digital videos, online live streams, zoom meetings, etc. The construction rates of new homes are also slow due to economic uncertainties, including the rising cost of goods like wood and lumbar to build a home. The result is that the housing market cannot keep pace with the rising demand. The few homes listed do sell fast with high prices.
Lowered Interest Rates
In the event of the 2020 Covid-19 pandemic and economic downturn, a historic low-interest rate has been recorded. This is a move that has simulated a constant entry of new home buyers into the market and for refinancing for existing home owners. The rates are likely to hold there for some time, meaning demand and purchase of homes will continue, “The Federal Reserve has no immediate plans to change interest rate strategy. If they stay low, buyers will continue to purchase as even if they are paying a premium, they are locking in really great rates for the next 30 years,” says San Francisco-based realtor Julie Upton in an article published in Better Homes & Gardens.
Entry of Millennials Buying Homes
Many young people are now opting to be homeowners. According to the National Association of Realtors, “Millennial buyers 22 to 30 years (Younger Millennials) and buyers 31 to 40 years (Older Millennials) continue to make up the largest share of home buyers at 37%.” And, their presence in the market just makes everything better. According to Real Estate Agent Matt Dubas, “Many homes in Washington State are even selling as a result of an online listing presence. We have seen millennials buying homes without ever seeing it in person!”
Regulated Lending Practices
Compared to the market conditions in 2007 and 2008, this year is witnessing a more regulated lending environment. It means that we do not expect the market to get flooded with unqualified home buyers. According to Realtor Julie Upton, In 2007, many people were buying homes, even those that couldn’t afford them because of loans, the days of NINJA loans (no income, no job, no assets) are long gone.” She continued, “These risky loans were common prior to the market crash. These days, lenders are very strict when qualifying buyers, and changes to appraisal laws have also tightened up the appraisal practices. Taken together, there are fewer risky mortgages in the financial system.”
Will the Housing Market Crash in 2021?
The housing market is expected to remain strong this year, according to Mia Taylor at Better Home and Garden, “Market crashes generally take place when there’s a serious breakdown somewhere in the system. But as outlined by so many experts, that’s not currently a problem. “
Housing Market Projection in 2021
The state of the pandemic has a significant impact on the future of the housing market. Over the months, with the presence of the COVID-19 vaccine, is starting to open things back up. The result is that a significant number of homes are being listed and the demand will be met in the long run. Once demand is met, prices consequently will adjust to a reasonable value. The presence of a good number of houses being listed means buyers will have options and bargaining power. The competition will also rise and have an impact on the prices.
There is a positive future for the housing market in 2021. This is a sign of relief for buyers that are willing to wait for things to normalize. Buyers can get homes listed within their budget, the trick is being patient.