The spring real estate buying season has sprung, and the white-hot housing market is once again prompting prospective buyers to compete against each other for available properties. The prices of homes now are at an all-time high. Even though there’s a worsening scarcity of supply of homes on the market and millennials’ frustration with high prices is growing, this season looks like it could still be record-breaking. The question is, how long can this market last?
Demand for Housing is Very High While Supply is Insufficient
The millennial generation is as large in number as the Baby Boomers. Most millennials are now at the age where they’re ready to settle down, buy a home, and start a family. The pandemic also sent office workers home to work from home offices to curb the spread of covid. As working from home became more commonplace, the demand for suburban homes increased. Suburban governments in most cities are reluctant to allow spec builders to build more houses amid fears of a housing bubble akin to the one in 2008. There is also the cost of materials paired with shortages of supplies to contend with. All of these factors combine to equate to high demand for housing.
Record-Breaking High Home Prices
This spring’s housing marketing is already hot, and it’s still early in the season. We’re coming off of last year’s 18.8% rise in home prices, which would normally cool the market, but scarcity is propping up the price of houses. It’s a seller’s market again this year, and buyers seem to want to get a head start on the house-hunting before prices rise any higher. There are indications that the real estate market’s available homes shortage will worsen, driving up this year’s prices by double digits yet again. Unfortunately for buyers, material costs and inflation are driving up the price of building a new home as well.
Rising Interest Rates
The government has to do what it can to lower inflationary pressures. To do that, they’re making borrowing money more expensive by raising interest rates. This translates to even higher costs to buy a home in 2022. Those who are priced out of the market by higher interest rates and housing costs will have to wait to buy a home.
Creative Housing Solutions
Inflationary pressures are keeping younger generations from marrying, starting families, and buying homes. There’s a new trend where groups of friends buy large homes together to make them more affordable to live in. They’re finding ways to make the scarce housing supply and unaffordable prices work for their budgets. These are unprecedented times when the average home buyer can’t afford to buy a home, yet the market doesn’t cool because of scarcity.
Is Relief In Sight?
Economists expect the economy to slow in Q4 2022. This could prompt the market to cool considerably. However, don’t expect the market to bottom out the same way it did in 2008. The short supply of homes will prop up the market and keep prices on the high end until supply problems ease. If you’ve been waiting to buy a home, the Potempa Team can help. We’ve helped people just like you buy the home of their dreams. In fact, we’ve made more than $33 billion in home loans for nearly 4,000 home buyers. Contact us today to find out how we can help.