The Continued Increase in Home Prices

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As the inventory of homes decreases, the values of homes are increasing. The housing market has been surging despite the pandemic and there are simply not enough homes for the amount of people looking to buy. With the inventory being low, home prices are skyrocketing. 

There are some speculations that the housing market will start to gain more inventory as 2021 continues. People could start to feel more comfortable putting their houses on the market when initially the pandemic might have halted their plans.

With the instability of the world at the beginning of the pandemic, no one knew how the real estate world would work. Now that we are almost a year into this health crisis, real estate agents have figured out what works and what doesn’t which will make people looking to sell feel more comfortable.

People who have been hit hard financially by the pandemic might be forced to sell to gain more stability. With the pandemic closing business all over, a lot of people have been laid off or simply not able to work enough. With only two stimulus checks and depending strictly on unemployment checks, some people have had no other choice but to sell their home. 

The national inventory decreased by 36.4 percent year-over-year, according to Realtor.com as well as the new listing inventory decreased by 11.8 percent. In November 2020, the median list price of homes rose to $335,519 which is 14% higher than the year before. 

Low mortgage rates still continue as we are nearing the end of February, in fact, the mortgage rates are a whole point less than the beginning of 2020. Rates still continue to be below 3% for 30-year and 15-year fixed mortgage rates. 

Sellers have the ability to increase the selling price of their homes because they know people will bite due to low inventory issues. The price of homes may start to even out as more houses enter the market but that all falls on if the demand balances out between home buyers and the number of houses on the market.

 

Renting vs Owning: Which Will Give You More Bang for Your Buck

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The final decision of whether you should buy, or rent is a big one. There are many questions that you have to answer about your own situation and life to figure out which option is better for you. As home prices are rising, is it really worth buying a home right now or renting and waiting? Well, there is no short and direct answer to that question but let’s break it down.

Home prices are increasing by the second in the real estate market, but low mortgage rates are helping to own a home be more affordable. Mortgage rates have dropped below 3% which is helping people buy homes even if the prices are skyrocketing. When compared to owning a home, the cost of renting seems to be more expensive.

When it comes to numbers, determining if you can afford to buy a home is crucial. Even though you can buy a home with a minimum 5% down payment, it’s a good idea to wait until you can put a good amount of money down. You may also need money to cover closing costs as well. The better your credit score, the better chance you will have getting a mortgage with a lower interest rate.

If you are looking to buy, there are many reasons why you should. You have the complete freedom to renovate your home to your desire. The big reason, well, the property is yours. You succeeded in buying a home. That, for sure, is a great accomplishment. But, with positives comes negatives. If you want to move and relocate somewhere else, the process of selling is a great ordeal. There are a lot of steps to take if you decide you want to get up and live somewhere else.

If you are wanting to rent, look at your living situation. Renting is a great idea if you plan on moving around a lot, you need time to save up money to buy a home, or you are paying off debt. When you rent, you can easily decide to move once your lease is up or you can try and get out of a lease. Another great reason to rent is maintenance costs. If there is an issue, call your landlord. Renter’s insurance will also go a long way.

When it comes to the negatives of renting, there are a few. If you want to change up your space, there is less freedom to do so. Ultimately, your landlord will have to approve any major changes you want to make which puts you in the position of not having a lot to say in the matter of what your place looks like.

There is no clear-cut answer to which is better, it all comes down to what is better for you and your financial and living situation.

The Rise of the Millennial Market

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Millennials, the generation that only wanted to rent and not buy, make up a huge portion of the U.S. housing market, 38%to be exact. This percentage is the largest share of one group in the housing market.

This generation is defined as the people who were born in the years 1981-1996. Millennials have the reputation of still living with their parents or not wanting to cough up a lot of money to buy a home. But that has majorly changed over the last year or so.

Throughout the COVID-19 pandemic, the housing supply remained strong with people flocking to buy homes, including millennials. The likely reason why this generation put off moving out and buying their own home was the increased home prices. But this has changed with incomes on the rise and housing becoming more affordable.

With incomes rising and housing being more affordable, low interest rates on mortgage helped a lot also. Homebuyers save hundreds a month just for low mortgage rates. Despite other turns in the economy, the falling mortgage rates are keeping home buyers engaged.

Not only are they buying their first homes, but they are also going all out. This group is earning more money a year than previous generations. According to Forbes, millennials will become the richest generation in history. The trend of millennials buying high end properties are a driving force for this type of real estate. This generation is looking for homes that are very different from generations before. With the case of having little to no children and jobs that may require them to travel more, luxury condos are on the rise.

Preferences for where to live brought on by environmental values will likely change the housing market. This group is driving the environmental and healthy living lifestyle and are flocking to areas that promote that well. Areas with gyms, trails, and other healthy activities are seeing an influx of home buying. This also has been changed with the pandemic by people looking for more space to do activities out in the open air to get outside of their homes.

For other generations, choosing where to live revolved around where you work but millennials are changing that view as well. Buyers began to look in areas where they wanted their ideal lifestyle, not revolving around work, with remote work becoming prevalent.

Housing Issues to Expect in 2021

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2020 was a whirlwind of events and turned everyone’s lives upside down. Although the housing market did not fall too hard due to COVID-19, there are some issues to come this year.

Remote work could mean more moves

With people still working from home with no end in sight, continued remote work could encourage more moves. Some businesses have made the decision to remain fully remote indefinitely which could mean more relocations in the next few months.

According to a survey put out by Upwork, 41.8% of Americans are fully working remotely. This is a major chunk of the American workforce. There could be many reasons for why people are relocating but working remotely gives another reason to move somewhere else. Workers may need a quieter place to work, more office space, or even a real office instead of a kitchen table. Workers often were only living in a set place due to their job but with the pandemic and working from home, they no longer have any ties to a specific place.

Inventory Shortage

With the increased buyer demand, comes the inventory shortage. There simply is not enough inventory for the amount of people looking to buy. This comes from the halt of home building in the spring due to the pandemic. Because of the inventory shortage, the prices of homes are heavily increasing. Multiple bids are being put out for the same house which only increases the price.

According to research by Freddie Mac. Residential, to make it out of this housing shortage, 2.5 million additional homes will be needed. Now that is a lot of homes that need to be built but homebuilders are confident. With the booming of different residential areas across the country, the difference could be made up, but home builders will be really busy.

Low Mortgage Rates

Low mortgage rates make owning a home cheaper and have improved people being able to afford owning a home. With how low mortgage rates are at the moment, it is only driving demand in the buyer market. The home buying process came to a crashing halt when the pandemic hit but when real estate agents figured out how to safely sell homes, the housing market rebounded. This coupled with the millennials lining up to own homes, is a big part of why the inventory is falling short. According to Bankrate, As of February 2, 2021 the 30-year fixed mortgage rate is 2.840% with an APR of 3.150%. When looking at a 15-year mortgage rate, it is at 2.330% with an APR of 2.660%.