Your Home might as Well be Painted in Gold

When 30 year fixed mortgage rates dropped into the 3’s in 2012 people went crazy, never had they the cost of money so low.  Then in 2020 when they dropped into the 2’s, it created a boom.

Home values are at an all time high due to increased demand and a limited inventory.  Sellers have the option to pick from multiple offers that are getting increasingly competitive.  Real estate markets all over the country are feeling the effect of declining interest rates and the largest first time homebuyer generation we’ve ever seen.

Why is the market so competitive?

The short answer is supply and demand.  There is a large demand for hones but a short supply.  Interest rates have dropped   and we are serving the largest first time home buyer generation since the baby boomers.  On top of this the baby boomer generation is retiring.  This collision of demand has created a unique market for both.

Now add the lowest interest-rates we’ve ever seen into the mix and you have the perfect storm for a market shortage. People have been hesitant to sell their houses due to the COVID-19 pandemic which has contributed to the issue.

The Real Estate Life Cycle

Building homes is an essential part of the real estate lifecycle, builders build and buyers upgrade,.
Home building has become increasingly more expensive over the last several years,  and when there is opportunity many new companies emerge o fill that void, so the building market becomes saturated and competitive as well.
I suspect this is all in after effects of the 2008 housing crisis, when building ceased stop the real estate lifecycle and created a shortage we are seeing today.   Building has picked back up but has certainly not caught up to demand.
Now we are experiencing another economic issue that will further contribute to the problem. Although it’s suspected that foreclosures will not be as high, we do see a hesitation in selling real estate do to people’s fear of the coronavirus.
This stagnation in the market combined with low interest rates has resulted in the aggressive bull market we see you today

Predictions for the Future

It is always difficult to predict the future of these things, I believe it is safe to say we will not see much improvement until the Coronavirus pandemic settles down.  Once things  start to resemble normal again I can imagine sellers being comfortable with selling their homes.  But there will be long term effects we cannot predict yet, it is possible that this pandemic will evolve home buying into something more efficient.  There is no doubt the world will conduct itself differently moving forward and how this affects real estate is to be seen.

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Justin Scott

NMLS 8758581

Executive Mortgage