What is going on with the Housing market? If you have been looking for a house or have been paying attention to the housing market, then you may have noticed that houses are selling faster than ever. You may have also noticed that there aren’t many houses for sale. So, what is going on?
We are currently in what is known as a seller’s market. In the most basic terms, it means that there are more buyers than there are sellers. Consequently, this causes inventory to be low and prices to be high.
On a deeper level it means that sellers have a distinct advantage. Buyers often face steep competition and may have to forgo asking for assistance with closing costs, negotiating certain terms, and even skip a home inspection.
Sellers may be in a position where they will have multiple offers for their home within days of listing. They have the luxury of taking the highest offer without having to do much negotiation with the buyer.
What is causing this? A combination of historically low interest rates and extremely low inventory are the main causes of the current housing boom.
We cannot talk about much of anything without mentioning the pandemic. So, how has Covid impacted housing?
Low inventory of housing has been around since the last recession in 2008. The pandemic just magnified it due to a lot of supply chains and construction being halted.
Unemployment spiked during the lockdowns, but most was temporary. The highest unemployment rates where with age groups or economic classes that were not candidates for home ownership anyway. People who were working started spending more time at home, working from home, or attempted to flee densely populated areas. All these factors increased demand for housing. Unfortunately, due to home construction being halted, and due to materials becoming expensive and hard to find, there ended up being a scarcity of houses available.
A Bubble About to Burst?
With the huge run up in prices many wonder when the bubble will break. Many experts don’t see a crash like in 2008 when mortgages went belly up on a mass scale. Lending standards are still fairly tight. This bubble is being fueled by the above factors. Some experts see things coming back to earth once prices make home ownership unaffordable.
Many predict a slow deflation in certain markets and a normalization of prices once things start to reopen and resume. A popping bubble probably won’t happen. Think more of a balloon slowly drifting along or gently falling back to earth.
To Buy or Not to Buy?
If you are looking for a house, then it goes without saying that this is not a good time to get a deal. Expect to pay a premium even in traditionally cheaper markets.
I have found value in fixer upper homes and in private listings. But if you are looking on the MLS, then prepare to pay asking price or even more.
As always, only buy when you are truly ready. Don’t be lured by cheap interest rates, and don’t get caught up in bidding wars. It may be a good time to take a step back and wait this out on the sidelines. Staying in your current home, continuing to rent, and saving up a little more money all sound like good ideas. Happy house hunting!
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