Housing pricing is rising year after year. In fact, in 2021 housing prices will reach a record level. It’s up 14.5% since last year. In real estate psychology, it’s called a sellers’ market. Buyers have a very hard time winning the bidding war on their favorite home in the current market. Historically, low inventory is another reason that makes it even more difficult to find and buy a house. Economic experts predict that despite low inventory, they expect a strong housing market in 2021 through 2022.
There are several factors behind the surges in house pricing. Buyers can take advantage of the low-interest rates before they go up. Along with this, as we mentioned before, low inventory is another reason caused by the Covid-19 pandemic. Fewer sellers, more buyers because homeowners are not interested in selling their house and moving out in such uncertainty. This leads to lower inventory and high demand for housing. Besides, the government stimulus support raised the liquidation level of people. Purchasing a house American dream, and it’s a great long-term investment despite the fear of inflation, the housing prices may appreciate even further. These factors all together cause the surge we are seeing in the housing prices.
A recent survey shows that people’s expectation of buying a house is at its highest level in history. Life with Covid-19 seems a kind of new normal for most people, and it caused the home value to go up even higher. Based on the current situation, it doesn’t seem that the covid-19 restrictions will go away soon. Therefore, the housing prices will not go back to where it was before the pandemic and may go even higher.
Newsday’s, working from home is new normal, people who work from home need office space at their home as well as a safe place to spend time with their family as they wish. The question is how long the housing market will maintain the current surge in pricing.
On March 17, the Federal Reserve Chairman announced that the interest rate will stay low until 2023. It means high demand and low supply. My suggestion to potential buyers is to enlarge their geographic search area in order to find and purchase their favorite home. If you ask any of my clients, they will tell you how I am persistent and work hard to help them find their dream home.
We see reports that show most states across the United States experiencing low supply and high demand in the housing market. Delays in construction supply are another challenge caused by the pandemic restrictions. The U.S. government is strongly supporting the housing market and planning on building more affordable housing. Right now, data shows around 3M homeowners are still in some form of mortgage forbearance. We see current mortgage forbearance differs from the mortgage forbearance in 2008. In 2008 loan foreclosure was the worst disaster that leads to the crash, however after the U.S. government passed the care act in 2020 supported the housing market with $50B in mortgages and rent relief programs. Currently, homeowners can be delinquent, not paying their mortgage, not affecting their credit but remaining in the house. That’s why the housing market is getting very interesting to everyone. Even investors are stepping in.
Landers are very busy with refinancing and first-time home buyers’ applications since 2020. The lending standards are getting tighter since the beginning of 2020. at the time, we have more high-quality Brower in the market than ever with a high down payment and great credit score, which is the opposite of 2008. That’s why it is less likely that a crash, such as the 2008 housing crash happen in the housing market. Another fact is that the lending standards are high. Banks are prioritizing people by picking up the most qualified Borrower, someone with a high credit score and stable job.
Let’s assume if the interest rate suddenly rises in the future, it may pressure downward on the housing prices in the short term. But may not lead to a crash in the housing market. Fortunately, the U.S. government is very supportive this time. We already experienced a spike in interest rate since med February 2021. The 10-year treasury yield (US10Y) jumped from 0.9 to around 1.7 in a matter of a few days and caused a rise in interest rate to around 3.25. currently, the US10Y set around 1.6 So far, we don’t see any negative effect on housing prices. The housing inventory is even going lower and the pending sale hit the record.
The bottom line, people are buying houses wildly and it is predicted that big investors are stepping in as well. The high demand for buying houses makes it more difficult for regular buyers. There is a high potential for more appreciation in housing prices. The new administration is working on an alternative plan to stop foreclosures through the upcoming years. It means no home foreclosure anymore. In fact, it is a great opportunity for first-time homebuyers if they can secure the low-interest rates. We are seeing the housing price is at its highest level, it may even go higher. Purchasing a house is a long-term investment, it’s important to secure a low-interest rate. so why not buy. Worst-case scenario, if you or your tenant can’t make a mortgage payment due to Covid-19, you can get mortgages forbearance without foreclosing or affecting your credit score and still live in your home until you get back on track.
A housing crash is not a simple scenario that could happen overnight. If we see signs that the housing crash is coming that will be because of major changes like congress suddenly giving up the housing and rent relief program, Eviction forbearance changes suddenly, lenders losing lending standards altogether. which is not happening because economists don’t see that will happen.
Regarding the pandemic, the covid-19 virus may come each year like a flu virus, people understand the value of a home more than ever. They want a home to do whatever they need to feel safe and live with their families. Interest rates are still historically low, and home purchase is strongly correlated with the interest rate. That is why we see a surge in housing prices. In fact, if you don’t have real estate, you are lifted behind.