The past year has become a whirlwind for the real estate market. Housing prices skyrocketed to 22.4% year on year. Suburban cities are seeing growth in home sales and population growth as a result of the COVID-19 pandemic. Finding a new home with living space, open space and even space for a home office and gym has become what buyers are looking for, and they are willing to pay higher prices for it.
With lower interest rates, more buyers than ever are competing for their dream home or even agreeing to a better price. Real estate markets in many cities see bids above the asking price with little or no contingency, and multiple bids for every home. The housing market is still hot with no end in sight.
Current real estate market conditions
This is the seller’s market. Sellers can simply state their price and terms and get what they want. The influx of buyers is ready and willing to buy right now. The demand for real estate is high and the supply is extremely low. Most housing markets across the country simply don’t have enough inventory to meet buyers’ demand. The supply of housing nationwide is the lowest in recent years at just 1.1 months. Typically, stocks have been closer to 3-4 months stock over the past 5 years. Now, with such high demand for homes in addition to record low interest rates, home prices are rising and market conditions are extremely competitive.
What affects the housing market?
Many factors directly affect the housing market. Previously, the season and location were the most influential factors. While these are still important factors, we are now in a completely different ball game.
- Low interest rates give buyers a higher spending budget. They can afford much more housing and stretch their money further with lower interest rates. The uncertainty about when rates will rise again makes buyers panic and buy now.
- Rising house prices are prompting people looking to downsize their floor space to cash out their current homes and buy something more modest. It’s the same with people who have a second home or a vacation home. Now is the time for them to sell and make good returns on their investment.
- Bids in excess of the asking price also increase the value of nearby homes, which will be priced higher if comparable homes on the same street were recently sold at the maximum dollar and list price.
- Supply is an important factor in the housing market. With such a low supply of housing, competition becomes fierce, which leads to higher housing prices. As many people try to move to the suburbs and from the big cities, in markets that have never been in such demand, homes fly off the market in a matter of days.
Housing market trends
The housing market is currently at its peak. The average price of a single-family home rose to $ 371,000. That’s $ 143,000 more nationwide since 2016. Housing prices continue to rise, having increased by 22.4% over the past year. This dramatic rise in prices is causing some investors and buyers to worry about a correction in house prices in the coming years.
Rental market trends
The rental market is also showing an upward trend: over the past year, rental rates have increased by 3%. The average rental price has increased by almost $ 300 per month over the past 5 years. As some buyers are taking a break from the competitive housing market with low inventory levels, many are turning to rentals to ride out this extreme market. The level of vacant space for rent in the country is only 6.8%. This is good news for investors looking to buy property for rent, because rental rates are still rising and the number of vacancies is low. However, it can be difficult for tenants to raise rental rates. With a limited rental market, the demand for affordable housing and rental properties is increasing.
New trends in housing construction
As construction costs continue to rise, construction jobs are also on the rise. The mood of the builders is high due to the lack of housing. New housing developments have resulted in more housing and new investment opportunities. However, construction is progressing more slowly than anticipated due to record-high construction costs and stock depletion or non-fulfillment of orders for many materials. Items like home appliances, windows and doors are simply harder to find as production has declined and demand has increased. Buyers who were having trouble buying decided to stay in their current homes and renovate, while new homes were required in many cities.
Lots of home renovation shows have inspired many people to renovate and relocate homes, which in turn has fueled growth. sale of pledged property and led to the fact that the number of distressed properties on the market fell to a record low of just 0.3%.
Buyers and investors equally ventured to acquire alienated property in order to renovate or overturn. This is great for nearby homes because there are fewer distressed and abandoned homes in the foreclosure process, which helps raise the value of the property.
2020 COVID-19 pandemic sparks major surge unemployment rate… The national average unemployment rate rose to nearly 15%, up from 3.5% before the pandemic. Now the rate has dropped to 6.1% and continues to decline. Job growth and employment rates rise as businesses start operating at full capacity and the economy picks up again. Statistics show that the country has not yet reached the level at which it should have been a successful return, but forecasts are optimistic that it will.
Mortgage loan rates
Although mortgage rates tend to fluctuate on a daily basis, they have remained low (between 2.6% and 3%) over the past year. This is why buyers are taking advantage of the current real estate market and borrowing more than ever, because with lower mortgage rates, their loan officers can lend them more money. Homebuyers can then buy more expensive homes, fueling the growth of our current real estate market. As buyers choose the best rates, they learn that things like credit rating, loan duration, types of interest rates, and even down payments affect their interest rates and monthly payments. Higher credit ratings, shorter loan maturities, fixed rate mortgages, and a sizable down payment can lower your interest rate.
Current forecast of the real estate market
While it is difficult to successfully determine the prospects for the real estate market for 2022, many states in the country still do not even see a decline in home sales. By now, the market was expected to return to normal, but as most of the population moved to the suburbs and low interest rates continued, there was no end in sight. The value of single-family homes is expected to level out slightly as the number of buyers shrinks. Buyers, real estate investors and real estate agents will continue to monitor mortgage rates to further determine the next year in real estate.
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