All the indicators appear to be here: How much over list price should I write an offer in 2021, jumped 350% in Google Searches recently. The phrase, “When is the housing market going to crash?” had spiked 2,450% in the past month. Home prices are up 10.4% year over year in Feburary, the largest jump since 2006! But is it a bubble?
Other indicators suggest it isnt a bubble, but what gives then? Why all the craziness?
The Pandemic, the acute supply shortage, and ultra low intrest rates have spiked demand at the same time producers are facing an uptick in raw material pricing.
Millienials have now overtaken babyboomers as the largest generation. Many of them delayed their starts in getting married and raising familys in the aftermath of the great recession. A surge in Millianials and Gen Xers buying and upsizing their homes to accomodate their needs is taking place. In addition to that, in 2020 the world experienced the Corona Virus pandemic that upheaved the traditional work place norms with many individuals continuing to work from home going forward. With so many spending more time in their homes, they began looking at their space differently and needing more of it or for different space to make it function better for them in the new norm.
Prior to this, we were already expericencing a supply shortage in the wake of the great recesssion that displaced builders and skilled contractors. Banks were slow to lend to speculative projects and supply has suffered and never recovered.
Adding fuel to this fire, interest rates have reached all time lows, bringing affordabiltly to buyers and putting upward pressure on house prices.
The pandemic has disrupted supply chains, creating shortages while demand remains strong, driving raw material prices higher in new construction.
The housing market is more competitive than we've seen it, however there are a few indicators that suggest it is not going to a runaway home price situation or a housing bubble.
Mortgage applications are declining as rates have pushed up slighltly. One indicator suggests buyers are dropping out of the market or backing up on their housing moves. Sellers could be forced to tame their expectations as less buyers compete. In the meantime, builders are slowly ramping up production to help with the supply deficit. As the supply gap narrows price pressure will lift.
Private investors and Corporate cash investors from Wall street have invested heavily in Real Estate since the great recesssion shoring up a back stop to the market.
As these moves take place, I expect to see the sale price pressure release gradually and normalize. Given these indicators and the possibility of an uptick in the inflation rate, we find it unlikely there will be any widespread roll back in prices. Real Estate is local and markets will differ based on the unique influences that relate to your market.
If you have questions about this article or about selling your home we'd love to hear from you. Give us a Call, Text, or shoot us an email.
