In the early months of the COVID-19 pandemic, toilet paper, water, and other essentials seemed to be in high demand and scarce. Now we can add housing to the list. A new report by the National Association of Realtors® (NAR) shows Americans are taking advantage of historically low-interest rates to attain homes that are spacious and provide more comfortable work-from-home accommodations.
Home sales have been trending upward since the nation started awakening from its pandemic-induced slumber and soared to a 14-year high in August. With the increased housing demand, prices also climbed between May and July, recording the highest two-month appreciation in 30 years of record-keeping, landing at 2%.
“The past few months have shown how valuable real estate is in the country, both to our nation’s economy and to individuals who have been given an opportunity to rethink their location and redesign their lifestyle,” said NAR President Vince Malta.
Homes that would typically be on the market for several weeks are now gone in a matter of days. With the lack of resale inventory available, one would assume that new home construction would be an alternative. Unfortunately, builders also can’t keep up the housing demand, which is a trend that goes back at least ten years. Couple that with the fact that lumber prices have surged the past several months due to demand and supply issues caused by the pandemic, new construction homes have seen significant pricing increases, as well.
Anyone who lives here in the Treasure Valley can understand the homebuying challenges facing the nation as they’ve been living them the past several years. Unprecedented demand and lack of housing supply have caused home prices to skyrocket in recent years. What’s happening nationally is nothing new to area residents. A strong seller’s market is present in the area with no signs of that changing anytime soon.
It seems the rest of the nation is now feeling the pressure of a white-hot housing market. As people flee larger metropolitan areas for smaller urban areas, coupled with extremely low-interest rates on mortgages, there’s a massive demand for an already taxed housing market.
Opportunities abound for people looking to sell their home, but as home prices continue to tick higher, there’s concern that newcomers to the housing market may find themselves shutout when it comes to buying a new home.
Lawrence Yun, Chief Economist at the National Association of REALTORS®, had this to say, “The housing demand is robust, but supply is not, and this imbalance will inevitably harm affordability and hinder ownership opportunities.”
Another recent study, released by Attom Data Solutions, shows that Median home prices are currently less affordable than historical averages in approximately two-thirds of the U.S.
“In a year when nothing is normal, owning a single-family home has become less affordable to average wage earners across the U.S., despite conditions that would seem to point the opposite way,” said Todd Teta, chief product officer with ATTOM Data Solutions.
According to the ATTOM study, Ada County saw annualized wage growth of only 3.6% year-over-year for the third quarter. Meanwhile, the median home price has shot up 15.9% year-over-year, with home prices exceeding wage growth by a large margin. Additionally, Canyon County saw its wages grow 4.6% in the last year, while its home prices climbed nearly 9%. It, too, is mired in a seller’s market where prices are exceeding wage growth. Both counties are less affordable than they have been historically.
Teta offered this evaluation, “Wages are up, and mortgage rates are down to rock-bottom levels, which should work in favor of home buyers. On top of that, the American economy has suffered greatly since the Coronavirus pandemic began surging over the Winter – a plight that normally would drop home demand and home prices. But those same low mortgage rates, along with other factors, have led a lot of buyers into the market chasing a reduced supply of homes. The result is price hikes have raced past the impact of wages and mortgage rates.”
If you’re considering buying a home, as history has taught us, the sooner you buy, the better. Prices will continue rising, and until demand slows and interest rates rise, sellers will continue to be in the driver’s seat.
Photo Credit: iStock.com/Kuzma