Is There A Housing Bubble?

Dated: May 18 2021

Views: 245

Is there a housing bubble? Absolutely not, Heres why

 

Economics and the “Law of Supply and Demand”

Housing supply comes from two sources current owners that have listed their homes for sale and new construction.  As population grows more housing is required whether it is apartments, condos, or single family homes.

 

Issues Affecting Current Supply:

Traditionally most homeowners list and sell their homes on the average of every 4 years as income and living needs change.  However, over few years homeowners have been holding on to their homes longer and doing more renovations and additions. The net affect here is almost zero as they are also not adding the buying or demand side. The biggest issue on the resale side has been the pandemic in that a large portion of homeowners have been reluctant to make a transition as they have been feeling uneasy about their employment and the economy as a whole.  New Construction and condo building is adding to the available supply but not in a robust manner as seen in previous decades. The lack of intown large buildable tracts has affected the close in market for new construction.  Adding to this is the disruption of the building supply chain of raw building materials like lumber and windows. Prices has shot up too on these resources raising new construction prices, making resale homes and even better value now.

 

Buying and the Demand Side:

The historically low mortgage interest rates have really had a profound affect on the renting public and has driven a large portion of first-time homebuyers to the marketplace. These buyers are bullish on the economic expansion that is on the horizon and very secure in their employment. They understand that their buying power is at a all-time high and that window is closing soon. Other buyers are current homeowners looking to buy a different home or condo due to major lifestyle changes like working from home. One side effect is that density is a factor. Live-work-play lifestyle has taken a small hit in demand but the Beltline is still a huge draw.

 

2021 and Beyond:

We are anticipating that the supply crunch is going to ease up in the coming months with significantly more homes and condos coming on the market 3rd and 4th quarter 2021 and beyond as the economy rebounds and homeowner confidence in their employment strengthens. The other factor is inflation. We all have seen how the disruption in certain supply chains have had an effect on prices in the stores and especially the grocery store.  The Fed is watching this and will be sure to make monetary policy changes in the coming months to hedge against and ward off inflation nationally.  That action will affect the wider marketplace and will result ultimately higher mortgage interest rates. As these rates rise it reduces the buying power and will slow some buyers coming to the market.  So what does all this mean? There will be less buyers and more homes available but it still will be a seller’s market for the foreseeable future but not the extreme seller’s market over the last 6 months.

 

So those waiting to buy, Do so at your own peril as prices and interest rates are only gonna go up and buying power down… 

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Caleb Scott

Caleb joined Bill Forrest at PalmerHouse Properties in October of 2017 as a Marketing Assistant. Since then he has been instrumental in the development of Forrest & Company’s brand identity and soci....

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