Housing Market Not Expected to Cool The 2021 U.S. housing market has been hot, with government and business observers not expecting a slowdown anytime soon.

The housing market for the first quarter of 2021 has been a combination of bidding wars, low inventory, and rising home prices. Although these factors show signs of a real estate housing bubble, experts claim things are not as bad as they seem.

So, why are home prices rising?

Factors Driving the Housing Market

While other industries struggled, the real estate sector managed to remain unharmed during the pandemic.

As cities locked down due to the pandemic, people began to navigate away from the city and more towards the suburbs, searching for more room. Likewise, homeowners sought a change as most worked from home and spent more time in their homes.

Historically low interest rates, coupled with homeowners working from home, accelerated competition in an already competitive market. Mortgage rates dropped as low as 2.5% during the pandemic, motivating many homeowners to refinance or sell, not knowing if rates would ever be that low again.

Related: Home Affordability Hits Highest Level in 3.5 Years

FHFA Housing Market Predictions

As builders struggle to meet market demands, FHFA predicts the housing market will continue to be competitive. However, as mortgage rates slowly rise, some homebuyers will lose purchasing power, leaving Realtors to believe buying will begin slowing down.

Why Are There Not Enough Houses?

The results of a Zillow housing survey suggested that since 1959, America has needed to build 1 million homes per year to keep up with demand. The last time the country produced this amount of homes was in July 2007. A year later, the U.S. fell into a subprime mortgage crisis.

The answer to the question about why the U.S. is not building enough houses is complex. However, when builders were asked what was holding them back, many interesting answers emerged.

One reason was that local regulations made it tough to build. Often developers who buy land to build upon are forced to build a minimum number of houses, thus making it difficult for smaller operations due to capital requirements.

Related: 2021 Expected to Be a Sellers Market for Homeowners

Conclusion

Since 2011, U.S. home prices have been on the rise. However, as the U.S. economy recovers from the pandemic, the housing market will begin to adjust, and even then, Realtors are unsure of the outcome.

Until construction catches up with demand, the real estate market will likely remain competitive for some time. But, again, Realtors expect it to take a year or more for the market to return to normal.

With multiple factors, it is evident the market is not ready to cool off anytime soon.

Marimark Realty

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To begin the journey of purchasing or selling your home, or purchasing commercial or investment properties, contact us at your earliest convenience.