Despite the global pandemic and national unrest caused by protests and the upcoming election, America’s housing market is experiencing a remarkable comeback. Median home prices are up and homes are selling faster than they did at this time last year. Bidding wars are becoming common and Americans are feeling confident about buying and selling homes. So just what is driving this bullish housing market? Let’s take a closer look.
Historically low interest rates
Mortgage interest rates have hit historic lows, which is great news for homebuyers – especially those with tighter budgets. The average mortgage rate for the week ending July 9 was just 3.03 percent. Rates have not been this low since Freddie Mac started tracking rates in 1971. Those with excellent credit scores have been able to qualify for rates at just below three percent. This can save homebuyers tens of thousands of dollars over the life of a loan and reduce monthly payments by more than $100. And the low rates help to offset the cost of higher home prices in today’s market. They also make it cheaper to buy than to rent in some markets.
Large number of buyers
The pandemic has thrown into sharp relief how important a home can be to our safety and well-being. Buyers whose plans to purchase a home early in the year were stymied by the pandemic are now back in the market. They’re joining those buyers who were already planning to buy a home this spring or summer and urbanites who suddenly feel the need to escape hard-hit cities. Having lived in lockdown for several months, many buyers want to set themselves up in a home with more space – especially if we have to shelter in place again this fall or winter. In addition, the real estate market has quickly pivoted to virtual closings, making it easier than ever to shop for and close on a home from the comfort of your couch. And those with good-paying jobs who didn’t get furloughed during the lockdown have been able to boost their savings over the last few months, making it easier to have a sizable down payment on a home.
Shortage of inventory
Finally, while there are many buyers in the market, there is a severe shortage of inventory. In fact, there is approximately one-third less inventory now than this time last year. And there was already a lack of inventory in 2019. Many sellers were understandably concerned about selling their homes during the pandemic. In addition, there has been a suspension of building in most areas with a resulting loss in hundreds of thousands of construction jobs. Inventory was already stretched thin, and the pandemic just widened the gap between supply and demand. With homes in short supply, it has driven up home prices, even amidst a pandemic and an economic recession.
While Americans may have been worried about the housing market early in the year during the beginning weeks of the pandemic, the market has remained strong. In fact, evidence suggests that the real estate market is poised to lead our nation into economic recovery in the following months.