This is due to three factors: low mortgage rates, a lack of new construction, and increased demand from buyers. With fewer homes on the market and more buyers competing for them, the competition is driving prices higher.
Mortgage rates are a major factor in the current housing market. Average interest rates for 30-year fixed mortgages dropped to 3%, the lowest level on record according to Freddie Mac’s weekly survey. This has made it easier for potential buyers to afford homes, leading to an increase in demand.
The lack of new construction is also contributing to the housing shortage. According to the National Association of Home Builders, only 1.3 million building permits were issued during the second quarter of 2020, a drop of 15% from the same period in 2019. This is due to a decrease in available construction workers and materials, which has slowed down the pace of new homebuilding.
The increased demand from buyers has exacerbated the housing shortage by further reducing the amount of inventory available. According to real estate brokerage Redfin, the median time a home is on the market has fallen from 54 days to 44 days since March 2020. As a result, multiple offers are becoming increasingly common, leading to bidding wars and driving up home prices.
The current housing shortage will continue to affect the market in the coming months. Experts predict that the number of homes available for sale will remain flat or decline further due to the continued lack of new construction. This could lead to a rise in prices as buyers compete for fewer homes. The National Association of Realtors expects existing home sales to climb 4.6% by the end of 2020.
In summary, the housing market is facing a new low in inventory due to three main factors: low mortgage rates, a lack of new construction, and increased demand from buyers. These conditions have created a competitive environment that is driving up prices and making it difficult for buyers to find homes. While the housing shortage is expected to continue over the coming months, the National Association of Realtors predicts existing home sales to climb by the end of 2020.
This article was contributed on Jan 01, 2024
