If you’ve been paying any attention to the housing market lately, you’ve probably noticed that the market is pretty hot right now. Prices are going up and it doesn’t seem to be slowing down. But what is behind the current housing market trends?
Low Interest Rates
Interest rates have been going down for a while now. Despite the most recent uptick in rates, they’re still at a historical low. Recent rates have clocked in lower than they’ve ever been since Freddie Mac started keeping track of them back in the early 1970s. Lower interest rates have the potential to save buyers thousands of dollars over the term of their mortgage. It even has the potential to offset the rising cost of the homes themselves. The result is some serious fuel on the fire of real estate demand.
Millennials Buying Their First Homes
The demand for homes is further increased by the fact that a lot of millennials are finally getting into the housing market. After having delayed home buying for years due to significant amounts of student debt and concerns about affordability, they’re starting to make their move. As much as 65 percent of millennial mortgage borrowers are first-time home buyers. Given the sheer size of this generation, which recently surpassed even the baby boomers in numbers, it’s not a surprise that the demand for homes has increased lately.
Fewer Homes on the Market
Of course, the clincher is the other half of the supply and demand equation. For multiple reasons, there are significantly fewer homes being listed on the market currently. A part of that is due to the pandemic. Fewer homeowners felt comfortable putting their homes on the market, which decreased the supply. Builders are also struggling to keep up with the demand for new houses. That’s a problem that’s been going on for years now, and it’s only getting worse. The rising cost of materials isn’t doing anyone any favors either. In short, there’s a more limited supply meeting a much higher demand.
There are a few reasons why buyers may be having a tougher time purchasing a home than they expected. There is much higher demand, thanks to lower interest rates. Millennials are finally entering the housing market, increasing the number of buyers. To make matters worse, there are fewer homes on the market at the moment. All things considered, it makes sense that we’re solidly in a seller’s market at the moment.
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