The housing market is one of the few things that hasn’t been negatively impacted by the Coronavirus pandemic. In fact, it’s booming. Many people are taking advantage of the historically low interest rates as an opportunity to upgrade, refinance, or purchase their first home, while others are moving in response to the pandemic in general. It has caused many people to rethink their living situation and encouraged some to move out of cities into smaller, more affordable suburbs and mid-sized cities.
As Americans settle into the “new normal” of working from home and social distancing, many are choosing to leave behind the busy, cramped city life for more suburban towns with more affordable housing and more space. Without the opportunity to enjoy the selling point of America’s favorite cities and no need to commute, many city dwellers have found themselves asking, “why am I paying such steep housing costs?” With more people moving out of big cities like New York and San Francisco, the urban migration pattern has seen a reversal. While it’s hard to say how many are permanently moving, first-time home buyers have also been flocking to the suburbs as opposed to buying in urban cores.
Lower rates, more house
Another factor driving home sales are the historically low interest rates. They have given homeowners more purchase power for upgrading and an entry point to the market for many first-time buyers. Low rates have allowed many first-time homebuyers the possibility to purchase a home who maybe wouldn’t have been able to with higher rates. Some are using the low interest rates as an opportunity to purchase rental property to generate passive income. The rates have certainly proved to be advantageous for many in different ways, contributing to the influx in home sales and competitive housing markets in many areas. As a result, mortgage applications were up 33% in August compared to the same period in 2019 (Newslink article).
Will Home Sales Keep Defying Expectations?
But everyone knows good things don’t last forever. With all this craze, people are wondering about the stability of the housing market. While it’s impossible to know for sure, economists unanimously predict that the housing market will remain stable with home sales continuing to increase.
For starters, interest in home purchasing remains high, yet housing inventory is lower now than it was a year ago. As we all know from our economics classes, short supply means higher demand, which ultimately is a good sign that the market will remain robust. Both home prices and home sales are predicted to increase in 2021, with sales projected to increase by 8-12% next year (Realtor mag article).
Low interest rates that are expected to remain low through the end of the year, and the Federal Reserve has extended the 0% interest rates through 2023 which means that mortgage rates will likely remain low as well. These are all solid indicators of a strong housing market.
The Bottom Line
Always be diligent about your investment. This trend has made for a quite competitive market, meaning bidding wars can drive offers above listing price. When buying at a “high,” weigh the risks of your investment and remain objective. Consider your situation: Is the home you are searching for somewhere you plan to stay for a while? If so, it may be okay to bid more. If you are moving to a home where you only plan to stay short term, you may want to be more conservative with how much you are willing to pay above market price. It can take time to recoup your entire investment and gain equity in your home. That’s the beauty of an ever-fluctuating market!
Regardless of when you purchase a home, it is one of the biggest transactions most people make in their lives, so you should always consult a professional (or several) to ensure that your investment is a solid one.
The housing market is booming!