The price of homes has been surging over the past year, which is an anomaly when it comes to the housing market. The pent-up demand during the shutdowns, lifestyle changes people made during the pandemic, and low-interest rates were the driving force behind the surging housing market. Many are now speculating that the real estate market is returning to a more pre-pandemic state, but this is far from happening. The real estate market is still vibrant as demand is strong and inventory low.
The inventory of unsold homes is currently down about 13% from this time last year. This equates to a 2.6 month supply, where a balanced market usually runs at about a six-month supply. Typical property is selling at only 17 days on the market and 87% of the homes for sale in August, sold in less than a month.
Houses are flying off the shelves, primarily due to historically low-interest rates for mortgages. Those who can take advantage of these rates are doing so. Mortgage applications are up 33% and many people are purchasing homes sight unseen. These same people are also first-time homebuyers or those purchasing second homes, which takes a home off the market but does not put one back on.
In addition to inventory, affordability is still a challenge. Securing a home in the current housing market is proving to be a frustrating and sometimes cutthroat process. Current home prices are up 14.9% since last year which marks 114 months of year-over-year gains in home prices. This is not anywhere normal, as those numbers usually land between 3-5% in an annual bump in price.
The downstream effect is that some people are being shut out of the market altogether. This is evident as many have put their search on pause even though there remains a need for a home. With low-interest rates, many people are also opting to refinance and stay where they are instead of trying their luck in such a competitive market.
Nothing in the housing market today or yesterday is normal. With how trends have been since the beginning of the pandemic, it truly is hard to predict when things may stabilize. It will also be of interest to keep an eye on the future effects of the wild times we have been experiencing with the market.
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