It’s been a strange time, living through a global pandemic. Beyond just the public health aspect, what first might have come as a surprise, is the housing boom that followed -- and perhaps even more surprising, is the fact that the housing market has remained red hot.
Demand, over the past year, has exploded, and when you pair that with a historically low supply of housing, it has made for a perfect storm, leading buyers to bid up the prices of available properties, which has sent home prices soaring, as Vox put it.
“We made an offer on a house and offered over $100,000 OVER asking price. They still chose a better offer than that,” one reader said.
So, that should give you a pretty good idea of what people are up against: All-cash offers, some buyers willing to waive contingencies, and properties getting snatched up left and right; sometimes within a few hours or days.
How did the market get so hot in the first place? We’ll take a look at some answers from the website Bank Rate.
1. As mentioned, when it comes to existing homes, supply is small.
The COVID-19 pandemic hit just as the 2020 spring selling season was about to kick off -- and the coronavirus situation prompted some homeowners to hit the pause button, creating a shortage of existing homes. That trend has continued on.
“In today’s market, (not all homeowners want to sell),” the article points out. “And with few homes for sale, the properties that are on the market are the subject of bidding wars. Many properties sell for more than the asking price -- reflecting the new reality that, in hot markets, the list price is just a starting point.”
2. New construction just isn’t happening quickly.
Building is a time-consuming process. Land has to be purchased, regulatory approvals must be won, and there just hasn’t been time to keep up.
And that’s not to mention, lumber prices soared over the past year or so, going from $349 per thousand-board feet in April 2020 to $1,514 this May, according to the trade journal Fastmarkets Random Lengths, and sourced in a recent NPR article.
“It was absolutely an astonishing run,” said Ross Stock, a third-generation sawmill operator, to NPR.
The story goes on to say that in the early months of the pandemic, many sawmills shut down, for health reasons and because they assumed demand for lumber would plummet. Instead, as we all know by now, demand took off. People added decks to their homes, wanted renovations they’d been putting off and “even (built) treehouses.”
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3. Demographic trends are driving demand.
Millennials make up a big group. Although the numbers appear a little different based on where you look, Statista.com estimates there are 72.26 million Millennials in the United States, vs. 64.95 million Gen X-ers. Here’s a breakdown by generation.
Millennials are a larger age cohort “in prime time for household formation,” Bank Rate said.
And the current housing boom is accompanied by an explosion of Hispanic homebuyers, as well -- a group expected to emerge as a major force in home-buying in the coming years.
4. Mortgage rates are at historic lows.
As of Sept. 6, the 30-year fixed-rate is about 2.8%, with a 15-year fixed-rate at about 2.1%, according to Nerd Wallet.
Considering these low rates, they boost consumers’ buying power, letting them bid up prices.
Did that answer any questions for you, about why this time remains so hectic? Do you have a wild housing story to share? Submit it here. And be sure to tune in for episode two of “Solutionaries,” which will focus on affordable housing.
Why are prices so high? When will they come down? Where can you find a place to live? “Solutionaries” will air at 8 p.m. on Sept. 20.