Housing transactions are on an upward trajectory, signaling a strong start to the year that’s raising questions about whether this upward purchase momentum will persist. As we delve into the data patterns, two key considerations come to the forefront: consumer demand and supply availability.
Without a doubt, consumer demand, which is fueled by historically low-interest rates and a demographic wave of Millenials coming of prime home buying age, is high. The low-interest rates are making home-buying an attractive choice, particularly for first-time buyers who are drawn in by the allure of owning property and escaping the rental cycle.
However, there’s also a noticeable absence of available properties. It’s already deemed a sellers’ market due to the scarcity, which may demotivate potential buyers who are struggling to navigate the competitive landscape. This could suggest that the current surge in home-buying might be short-lived unless there’s a sizeable increase in the housing supply.
Moreover, as we continue to sail these pandemic-induced turbulent times, the state of the economy will also play a significant role in determining the trajectory of home sales. Rising unemployment, business shutdowns, and reduced household incomes could throw a wrench into the gears of the housing market.
Commencing our analysis of the housing market with the pulse of the demand side, the initial part of the year has presented robust activity. Low interest rates have resulted in a sales spree, with buyers rushing to reap the benefits. Many industry experts attribute this to the all-time low 30-year mortgage rates. This has not only made purchasing homes more affordable but has also sparked a refinancing boom.
Apart from these attractive mortgage rates, another element pushing the demand is millennials reaching the home buying age. Numerous millennials are currently in their 30s, the prime home-buying years. The combination of the sizable millennial population and low-interest rates have formed the perfect storm for demand in the housing market.
On the flip side, the immensely low level of housing inventory is proving to be a substantial deterrent to potential homebuyers. The hunger for homes is real, but the scarcity of for-sale signs is a cruel reality facing the hopefuls. Recent data shows that the inventory of available homes is at an alarming low, and the consequent competition fierce.
Additionally, in highly popular metropolitan areas, open houses are teeming with potential buyers, resulting in aggressive bidding wars. This lack of available homes, alongside skyrocketing home prices due to high demand, may eventually slow the current rapid pace of home sales.
In regards to the pandemic’s economic impact, many factors remain uncertain. Nationwide, millions have lost their jobs, limiting their ability to afford a new home. There’s no doubt that this economic uncertainty has brought about apprehension among potential homeowners, and that may influence the aggressive purchase trends we’re seeing today.
Real estate experts are also sensing the undercurrent of change in the housing industry. According to the prediction trends, the housing market could eventually cool down, with a consequent moderation in price gains and a slow but steady increase in the number of homes for sale.
To that effect, understanding the timing of this potential shift is crucial. Some industry professionals predict the housing market will moderate by the second half of 2021, while others foresee a cooler market stretching into 2022. Lean inventory levels and continuing strong demand from buyers could delay this expected moderation.
When it comes to regional differences in the country’s housing market, part of the story lies in the influence of the pandemic prompting the trend towards remote work. Flexible work arrangements have freed many people to move away from expensive urban centers to more affordable living areas. Subsequently, suburban and rural areas have seen a surge in property demand.
Additionally, regions with warmer climates such as Florida and Southern Texas are experiencing an upsurge in demand as more people seek homes in areas that offer outdoor lifestyle benefits.
In conclusion, the housing market is on fire, with demand surpassing supply in many regions. This situation is fueled by low-interest rates and a surge in millennial buyers. However, the shadow of the ongoing pandemic coupled with a dearth of available houses could slow this fervor. Additionally, economic turbulence and job security remain significant factors influencing buying behaviour. So, while it looks bright for now, only time will tell if home sales will continue to climb at their current pace or if we’re on the cusp of a significant market transformation.
