Are you trying to buy a house? If so, you are likely familiar with how quickly houses are currently selling. Buyers have sometimes only minutes to decide if they want to buy a particular house, and competition is fierce. Many houses in especially hot markets like California are selling far over their listing price. Desperate buyers are even offering to forego house inspections in their urgent desire to buy a home. This kind of a crazy market begs the question, can the housing market get any hotter or is it cooling off?
Factors Creating the Hot Housing Market
There are several factors that have created this hot housing market:
Many Americans have been working from home now for over a year thanks to the pandemic. Our workplace has been forever changed, and a large swath of workers plan to continue to work from home even after the pandemic is over.
This situation is one reason why so many new buyers are entering the housing market. If they can work from home, they want a bigger living space than the apartments they currently live in. Also, many city dwellers want to move into the suburbs or the country so they have more space, especially since the commute is no longer a factor.
Millennials Ready to Buy
Many of those new home buyers eager to leave apartments are millennials who are naturally at the age where they may want to buy a home and start a family, regardless of the other factors heating up the housing market.
Millennials are currently the largest group of home buyers on the market.
Low Interest Rates
Another reason so many people are looking for homes is that mortgage rates are enticingly low. Currently, mortgage rates are averaging 3 to 3.25 percent, which can make homeownership attractive to new buyers. “Ali Wolf, a chief economist at real estate data and advisory firm Meyers Research. . .says, ‘If you look at what the monthly payments would be today versus a few years ago in some markets, the rates—as low as they are right now—[are bringing] that monthly payment back to 2015 or 2016 levels’” (Forbes).
The final reason the housing market is so hot is simply the rule of supply and demand. There are more sellers looking than homes available, in part because construction has not kept up with population growth.
Construction is happening, but thanks to the pandemic, there are supply chain and skilled labor issues. As a result of this, builders are having trouble producing houses quickly.
Can the Housing Market Get Any Hotter or Is It Cooling Off?
Simply put, the housing market will likely remain hot for the next few years. There simply aren’t enough available houses for the current need. When you add in building delays due to supply line issues thanks to the pandemic, one can see that this situation will likely persist.
While this hot housing market is great news for home sellers, it’s not good news for home buyers. Unfortunately, as prices rise, more and more Americans who are trying to find an affordable house will be locked out of the buying market, at least for the next few years.