It is official, the real estate markets in America are over-heating. Everywhere in the country right now, people are racing to sell their houses to the highest bidder who closes fastest.
If you’re looking to buy or sell a house, perhaps today is the best time to start. Who knows when this explosion is going to last? Some experts are even expecting another housing bubble to burst similar to what happened in 2008.
To look more in-depth into this situation, there are some things you must know. I have created a list of reasons why real estate markets are exploding all across America, fore more visit LyleBoli.com a site dedicated to real estate, business and finances.
Home building hasn’t kept pace with the population growth
This is probably the most popular reason that many experts have agreed on. Since the Great Recession, home building just isn’t in line with the population growth. Especially, when millions of Millennials have finally reached the home-buying age. This creates a huge explosion in the real estate markets and depletes the housing supply.
Mortgage interest rates stay low
Through three Presidential Administrations, the NASDAQ, S&P 500, and Dow Jones, are almost tripled during the same period. Also, among all mortgages, 4.96% or 2.5 million mortgages of all outstanding residential loans are still in forbearance.
These low interest rates have been making it easier for wealthy people to buy their 2nd, 3rd, or even 4th houses as investments. They are hoping that the values of these houses keep increasing, so they won’t sell anytime soon. Furthermore, the carrying costs will most likely be cheaper than the house prices. This creates a phenomenon called “shadow inventory”, as millions of homes will never hit the market.
Technology makes everything moves faster
Another factor that created this explosion is technology. I am talking about online listing platforms, virtual closings, and digital mortgage approvals, which make everything moves much faster than before.
Homes are being sold and bought at a faster rate, especially during the pandemic. The demand keeps increasing, while the supply keeps decreasing faster and faster.
Is this good or bad for the real estate markets in America? Well, some people will definitely have different opinions regarding this topic. It sure is nice being able to sell and buy houses without waiting too long or having to go through a complicated process. But, people who are still waiting until they can or are ready to buy a house will have a much harder time doing so. As the supply is getting low, and the prices will keep increasing.
The recession caused by the pandemic affects both supply and demand
This is such an interesting case: how can a pandemic that causes recession In America with millions of people losing their jobs and hungry can cause a boom in the housing markets?
This also correlates to what I’ve explained above; the mortgage rates that keep falling, attract people, especially the Millennials to finally buy a house. The mortgage rates fell significantly from 2020 to January 2021, at 2.65%.
People who can take advantage of this have realized it and created a huge demand for houses. Mortgage applications for new home purchases are up by around 33% compared to 2019.
People who have been on the edge of buying a house are finally jumping in. Many first time homeowners are created this year. Not to mention of the number of people who are buying their 2nd homes keep increasing too. 2/3 of home buyers didn’t even need to see the house before making the purchase. It’s like people are seeing red and there’s no stopping this surge of home buyers.
Not enough homes for everyone
Well, this explosion in the real estate markets is very interesting indeed. But, it’s kind of sad knowing that there just aren’t enough homes for everyone. The demand is just too big, and the supply can’t keep up at all.
While it’s not a new problem, the pandemic has made it much worse. The problem itself has already crept in before the pandemic. So, know what we’re seeing is the avalanche in progress. And judging by the situation today, this problem won’t go away soon. Panic buying is more and more common and with the help of technology, everything is happening very fast and can be very unpredictable.
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