If you are expecting the latest housing boom bubble to burst, don’t.
That’s because, as National Association of REALTORS® (NAR) chief economist Lawrence Yun said, “This (boom) is not a bubble. It’s simply a lack of supply.”
As basic as he makes that sound, it’s the reality. Housing is booming in America because of an historic low in housing stock on the market.
As a result, prices are going up, and in some places, buyers are buying homes above the list price just to ensure they win the bid.
All that’s doing is pricing out a lot of hard-working Americans from achieving the dream of homeownership.
And it’s not a good thing long-term, because if this isn’t a bubble, as Yun said, that means the prices aren’t going to plummet anytime soon, if much at all.
“This (boom) is not a bubble. It’s simply a lack of supply,” says NAR chief economist Lawrence Yun.
According to data from NAR, there are just 1.03 million homes available in America. In July 2007, there were four times as many homes on the market.
Prices are up 17.2% since March 2020 and the number of active listings in that same time period is down 54%.
Some cities are seeing a ridiculous jump in list prices. For example, the median price of a single-family home in Austin, Texas is now $520,000 – a 40% jump from the same time in 2020.
While mortgage rates are now back above 3% and likely not going to get any lower, that percentage is still appealing for buyers Combine affordable mortgages with a slowdown in housing development brought on by the COVID-19 pandemic; a flight toward bigger, suburban homes as people are finding they can effectively work from home; and a good stock market, allowing some individuals to have more money for a down payment, and it’s easy to see why prices are skyrocketing.
This is hurting the first-time homebuyer greatly, as they don’t have the personal wealth to compete with these individuals on the purchase of a home. Add in the fact that large corporations are buying up available homes and renting them, knowing the market is tough on Millennials and Generation Z, and the number of owner-occupied homes is drying up.
Some buyers are even gambling and willing waive the right to inspect a property or other financial contingencies before buying the property. Heck, some homes are selling sight unseen.
The one silver lining is rents seem to have stabilized, so people can find a way to get a roof over their heads. Albeit these are not always ideal circumstances as renting makes it harder to save to buy a home and start accumulating wealth.
But that’s only a small ray of sunlight. According to Yun, we are flirting with a dangerous situation where if rates remain low, demand picks up with new jobs, there’s no increase in supply, and the only thing that moves is home prices, more and more people will get priced out.
“That would mean we are creating a divided society of haves and have-nots,” he said.
About the American Property Owners Alliance
The American Property Owners Alliance (The Alliance) is a nonpartisan, non-profit organization created to protect and support property owners and pave the way for future property owners. Our mission is to educate property owners about federal issues, laws and policies; to advocate for owners’ rights and interests; and to mobilize, when necessary, to secure those rights and interests.
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