The real estate market has, blasted off. The stay-at-home culture with the pandemic, hit customers actually where they live, and necessity for housing has yet to ease up. Low home loan rates only added fuel to the fire.
As the U.S. housing market booms, a parallel rise in residential real-estate costs across the world from Amsterdam to Auckland is increasing fears of possible bubbles and prompting some governments to intervene to prevent their markets from overheating.
The unmatched volume of offers is a symptom of a pandemic-related surge in home sales. Relating to a September report from the National Association of Realtors, existing home sales reached a 14-year high last August. Similarly, housing offer hit a record low in September, and dropped even lower one month later to 2.5 months of supply.
Given the low inventory, home prices are also on the rise. Prices increased through the end of 2020, jumping the most in seven years by December, based on the S&P Case-Shiller US home-price index. Phoenix, Seattle, and San Diego saw price increases between the 19 cities surveyed.
Real estate craze is driven by a combination of factors. Home loan rates hit record lows a dozen times in 2020 alone, and also the pandemic induced a desire for backyard space or a more comfortable work-from-home arrangement.
Southern California home prices arrived at an all-time high in February as buyers ran amid a shortage of homes for sale, adding to signs that pandemic home-buying trends are stretching into 2021.
The information show that the rise in request, however, has not been met by a surge in listings, resulting in bidding wars and subsequent higher prices.
A major factor in the sales and price boom has been a drop in borrowing costs throughout the pandemic, with the average rate on a 30-year fixed mortgage falling below 3% for the first time.
Higher loan rates do not look like dampening demand for home purchases but they’re crimping refinance volume.
Mortgage applications to purchase a home rose 3% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. That is the fourth straight week of gains. Volume was 26% higher than a year ago. Annual comparisons, however, will likely end up with large over the next month since homebuying stalled at the start of the pandemic one year ago.