Homeownership has long been considered a marker of success, a key element of the American Dream. But sadly, it's a dream that is increasingly out of reach for too many people, due to rising costs that seem to have peaked now in 2021. Why have this spring and summer been so hot? Let us break it down for you.
A market for anything has to consist of supply and demand, and these things need to find some kind of balance with each other to be called a market. Put simply, the supply of available houses doesn't meet the demand for them, for several reasons.
Many cities have instituted more (and more stringent) zoning regulations in the past few years that also increase housing prices along with them. Whether the laws regulate where houses can be built, how much land they must be built on, or specific permit requirements that drive up the cost of new construction, local zoning laws play a huge role in the housing supply for a given area.
Construction costs also directly affect a city's housing prices, whether through the permit costs mentioned before, or through tariffs on construction materials coming into the country. Tariffs on metals, flooring, and wall panels coming in from China were raised from 10% to 25% during the Trump administration, which contributes in a large part to the lack of new construction in recent years.
In addition, many builders still haven't recouped their losses from the 2007 recession, when newly constructed communities were built all over the country and then couldn't find owners to buy them after the crash. Trading Economics reported that the rate of new housing sales declined sharply during the recession, and has yet to completely bounce back to its former numbers.
In 2021's competitive housing market, demand is well outpacing supply. 2020 saw mortgage rates dip to historically low numbers, flooding the market with buyers eager to escape paying rent or to upgrade their living situation. Now that interest rates are rising again, people are rushing to buy before they get shut out of a good deal.
There also just aren't as many people selling their homes currently— for most of this spring and summer, there have averaged about half the number of available houses as there were real estate agents to sell them. In March there were 20% fewer homes listed nationwide than there were in March of 2020. Not only that, but homeowners are more reluctant to sell, either unwilling to let others into their home for listings during the pandemic, or uncertain they'll be able to find another home to move into.
Speaking of the pandemic, like so many aspects of our daily lives, COVID has affected the way we live as well as where we live. With so many companies offering partial or fully remote working options, would-be buyers (especially millennials, who make up a third of the work force) are less constrained by location than before. While economists expected housing to dry up along with the rest of the economy during the first year of the pandemic, the opposite happened— contributing to the current perfect storm of low supply, high demand.
Clearview Realty has more than 25 years of experience in the mortgage industry – just the expertise you need for a successful outcome. Our team of mortgage consultants work to simplify the process for you, while educating you on this complex process. Our priority is customer service. It is our goal to make this process as easy and convenient as possible while getting you the best deal on your loan. We work with borrowers of every type from those who want to buy their first home, refinance the house they are in now or have credit challenges. Whether its your first home or you’re an experienced home buyer, we’re here to ensure everything goes as smoothly as possible.