If you’re in the market to buy or sell a home, or know someone who is, you’ve probably realized that real estate is booming. In some neighborhoods, homes are being sold before they even hit the market! But why is the housing market so hot?
According to the National Association of Realtors (NAR), a new record has been set with the median price of homes from March 2020 to March 2021 soaring by 17%. It’s definitely been a ‘seller’s market’, and we should take a look as to why.
Here’s a look at 3 top reasons as to why the housing market is so hot.
Supply and Demand:
Inventory is scarce. As the world went through a national pandemic, uncertainty was certainly felt. Plans were altered or changed. In some areas, people reevaluated when the country went into lockdown. Remote work and school began, and that allowed for flexibility to think about moving. Especially those who lived near major cities. People’s needs shifted being home more, and they decided they wanted a fresh start. This was due to home size, proximity of family, outdoor space, etc. While some people wanted to move, some homeowners hit the pause button with listing their homes. That created a shortage of existing homes on the market, and that trend has steadily continued.
Homeowners who want to sell feel as though they can’t, because the question is where would they go? With higher prices, and lower inventory, they’ve decided to stay put. Those who do list their homes have been fairly confident knowing that their homes will sell. And these homes have been subject to bidding wars with sale prices far above listing price. With the simple principle of supply and demand, it’s no wonder why the housing market is so hot.
Construction and Materials Cost:
Along with existing home inventory shortages, there is land shortage too. Also, due to the coronavirus, materials have been difficult to get. Some materials were being manufactured overseas. This, combined with job layoffs, has made building expensive and a delayed process.
Lumbar prices have skyrocketed, and the building process has many steps. Besides materials, permits are required for building too. Multiple specialty companies collaborate to build homes. Along with project managers or general contractors, this includes: plumbers, electricians, roofers, painters, etc. With land, material, and worker shortages, construction can seem unattainable during these times. Thus, answering another reason as to why the housing market is so hot.
Low Mortgage Rates:
Mortgage rates are historically low. According to Bankrate’s latest survey, as of June 29, 2021, the national average APR is 3.330% for a 30-year fixed mortgage. And the national average APR is 2.710% for a 15-year fixed mortgage. These aren’t the lowest rates they’ve been all year, but compared to previous years, these rates are very low. This in turn boosts buyers’ buying power, and allows buyers to bid up prices for the homes that are available on the market.
Even though the cost of homes may have increased during this seller’s market, low mortgage rates can make up for that. Over time, the cost can weigh even better with lower rates and a higher purchase price. Between low inventory, construction and material costs with worker shortages, and mortgage rates, it’s not surprising why the housing market is so hot.
If you’re thinking of buying or selling a home, even with the housing market being so hot, Trelora can help. Our team of experienced agents will sell your home for a low-fair fee. If you choose to buy your home with Trelora, we will split our commission with you up to $6,000 cash back at closing.