The housing market has been booming in recent years as more and more individuals are searching for an ideal home. Even with the COVID-19 pandemic putting a halt on many economic sectors, the housing market remains resilient due to strong consumer demand. As of late, the mismatch between available homes and those looking to buy or rent them has become even more pronounced. Home prices have risen significantly due to this imbalance, while the number of people who have been able to buy a house is steadily increasing. In this article, we’ll explore why demand continues to outpace supply in the housing market and what it means for buyers and sellers alike.
The current state of the housing market
According to the National Association of Realtors, the housing market continues to surge as demand for homes outpaced supply in March. This marks the fourth consecutive month that home sales have increased on a year-over-year basis.
The inventory of available homes for sale remains tight, which is contributing to the rising prices. The median home price in March was up 7.5% from a year ago, to $229,000. And properties are selling quickly: the average home was on the market for just 40 days.
Low mortgage rates and a strong job market are driving the demand for homes. First-time buyers made up 31% of sales in March, which is down slightly from 32% a year ago.
Investors are also playing a role in the housing market recovery. cash buyers accounted for 21% of sales in March, which is up from 18% a year ago.
The reasons behind the surge in demand
There are a number of reasons behind the surge in demand for housing. One is that the population is growing. This is especially true in urban areas, where there are more people moving in than there are houses available. This has led to an increase in prices, as well as a shortage of available properties.
Another reason for the surge in demand is that interest rates are at historic lows. This makes it cheaper to borrow money and buy a house, which has helped to fuel the market. Additionally, many people are looking to buy now before prices rise any further.
Lastly, the job market is improving, which is giving people more confidence to buy a home. Wages are also starting to grow, giving buyers even more purchasing power. All of these factors are leading to a strong housing market that is outpacing supply.
The impact of the pandemic on the housing market
The COVID-19 pandemic has caused a surge in demand for housing that is outpacing supply. This has led to an increase in home prices and bidding wars in many markets across the country. The pandemic has also caused a decrease in the number of homes available for sale, as many sellers have taken their homes off the market due to health concerns.
The pandemic has had a major impact on the housing market and has created a seller’s market in many areas. If you’re thinking of buying a home, it’s important to be prepared to compete against other buyers. And if you’re selling a home, now is a good time to do so.
The shortage of housing inventory
The inventory of homes for sale declined in July for the 16th consecutive month, according to the National Association of Realtors. This shortage is keeping prices high and preventing more sales from taking place.
There were 1.88 million existing homes available for sale in July, which is 9.5% lower than a year ago and the lowest level since May 2004. The Inventory-Sales Ratio, which measures how long it would take to sell all of the homes on the market at the current sales pace, fell to 4.3 months in July, down from 4.7 months a year ago and the lowest since February 2005 when it was 4.2 months.
A six-month supply is considered to be a healthy balance between supply and demand in the housing market. The current level of inventory is well below that mark, indicating that there is more demand for homes than there are homes available for sale. This shortage of inventory is preventing more sales from taking place and causing prices to remain high.
The number of first-time buyers decreased slightly in July to 32%, down from 33% a year ago, as many are being priced out of the market by the lack of affordable homes for sale. Existing home sales increased 1.3% from June to July and are up 11% from a year ago, while median prices have increased 5.3% over that same timeframe.
The challenges first-time homebuyers are facing
There is no question that the housing market has been on a tear lately. Home prices and rental rates are soaring in many markets across the country, as demand for housing continues to outpace supply. This is especially true for first-time homebuyers, who are facing challenges unlike any we’ve seen in recent years.
The biggest challenge for first-time homebuyers is coming up with the down payment. In some markets, home prices have increased so rapidly that even buyers who have saved diligently may not have enough for a down payment. And with interest rates still near historically low levels, there is little incentive to wait to buy a home.
Additionally, first-time homebuyers are often competing against all-cash offers from investors and other experienced buyers who may be able to close more quickly. This can make it difficult to win bidding wars and can often lead to paying more than you had hoped for your dream home.
Despite these challenges, there are still ways for first-time homebuyers to succeed in today’s market. Working with an experienced real estate agent can give you an edge over other buyers, and being realistic about your budget and expectations is also key. If you’re willing to put in the work, buying a home in today’s market is still possible – even if it isn’t easy.
The potential for the housing market to cool off
As we’ve seen in the past, when demand for housing outpaces supply, prices will continue to surge. This is good news for sellers, but not so much for buyers who are already struggling to afford a home. The potential for the housing market to cool off is high, especially if interest rates rise or there’s a decrease in job growth.
For now, the housing market continues to be a seller’s market with low inventory and high prices. If you’re thinking of buying a home, it’s important to be prepared for a competitive market. Work with a real estate agent who can help you navigate the process and be ready to make an offer quickly when you find the right property.
The housing market continues to surge as the demand for homes outpaces the supply. Rising incomes, near-zero mortgage interest rates, and a desire to move into larger spaces are driving up demand while construction costs remain high. The result is higher home prices and longer days on market, making it harder for buyers to find their dream home in today’s tight real estate market. As long as these conditions persist, we can expect the current trend of strong housing markets to continue into 2021 and beyond.