US housing prices are on the rise, but real estate demand remains stable – NBC Connecticut
The pandemic has had a profound effect on prices in the United States, but over the past year the housing market has been particularly affected.
Jeff Tucker, senior economist at Zillow, said he’s never seen the housing market so hot and it all depends on supply and demand.
The lack of supply, he said, can be attributed to the 2008 recession, which slowed housing construction. Now builders are trying to catch up, but there just aren’t enough homes.
Additionally, people have been reluctant to list their homes during the pandemic – a time of health challenges and financial insecurity.
Low housing stock leads to overcrowded open houses, bidding wars and high selling prices.
Zillow’s Home Value Index data covers over 2,860 counties in the United States and tracks the typical home value in an area. Over 90% of counties in America are represented in the dataset.
Since April 2019, 10.8% of counties have seen a typical home value increase by more than 20%, up from 3.6% from 2017 to 2019.
House prices have seen sharp increases since before the pandemic
The median household income in Hartford County is $ 75,148. Using the rule of 3 times your annual gross income, the average household can afford a home of at most $ 225,444 with that income, and the typical market price in April 2021 was $ 283,874 – an increase of $ 14. 79% since before the pandemic.
But there is another factor that is fueling the problem of supply and demand in the housing market and rising costs. There are currently an unusually high number of people around the age of 30 – an average age for buying a first home for Americans.
“If you ask them, a lot of them might have said, ‘Yes, I’m renting now, but I’m probably going to buy my first home in the next two or three years. “Tucker said.” Well, I think the pandemic has caused a lot of these people to go ahead and buy now. “
Millennials are now at the age where they are starting to have their first children and therefore need a bigger, family-sized home. Combined with the rise of remote working and historically low mortgage rates, the pandemic has given people in their 30s the perfect opportunity to become homeowners.
Mortgage rates are at their lowest since December. Tucker says they hover around 3% for a 30-year mortgage, and that a low mortgage rate can go a long way in making even a high home price affordable on a monthly basis.
As prices skyrocket across the country, there are specific areas that have gained the most traction.
Due to COVID-19, there has been a migration from major cities like New York and Los Angeles to the suburbs with promises of more room for Zoom and private green spaces. But experts say it was not a sudden boom from the pandemic, but rather an acceleration of pre-existing trends.
For several years, there has been a trend of migration from the Northeast, Midwest and California to Sunbelt states like Texas, according to Tucker.
Places like Houston, Dallas, Austin, Phoenix, Miami, Atlanta, and Charlotte were already growing rapidly, but Zillow experts say areas of the Intermountain West like Boise, Spokane, and Salt Lake City have also recently become points. hot for home buyers.
Percentage of population change in working-class areas since 2010
For buyers hoping for a repeat of the housing bubble recession, Tucker says don’t hold your breath. Most borrowers currently get fixed rate mortgages, rather than lump sum payments, so there is no reason to expect them to suddenly become unaffordable.
“We just don’t see a lot of the risky pieces that were in place before during the housing bubble of the early to mid-2000s,” he said. “When we look at the loans made, the mortgage lenders underwrite these loans very carefully, checking that the buyers have the income they claim to have and that they can afford the loans they take. “
What Tucker recommends instead is that you are prepared to face the competition in today’s market. You should expect to see competing offers and the possibility that the sale price will be higher than the list price.
Finally, you must also be prepared to wait.
Homebuyers historically gain more bargaining power in the fall and winter. Buyers have a few more options to choose from and a little less competition over the seasons.
“Being prepared to sit down and let a few houses get away to avoid paying too much can be worth it,” Tucker said.