As the sellers market of 2020 continues into 2021, many consumers and industry experts are racking their brains to answer one question: will the housing market boom or bust? As both sellers and buyers are trying to find the best information, let's break down the market as it stands.
1) Simple Economics:
Since the earliest boom of real estate purchase came when interest rates increased at the beginning of the COVID-19 lockdown, the demand for homes has increased. As homes have been purchased at an increasing rate, the supply of homes has gone down drastically over the past 12 months. With supply at a deficit, and demand at an all time high, the price of homes are very high at the moment. These factors lead to what is known as a ‘sellers market’ or a market in which home values benefit sellers.
2) Why is Demand High?
As we mentioned earlier, demand is high due to decreased mortgage rates. (good place to insert some data) due to this, it is advantageous for buyers who will incur less risk in purchasing a higher price home, as the interest rate on their loans will be lower. However, as interest rates slowly increase, demand of home buyers decreases.
3) Meeting Demand with Supply:
To meet the demand of homebuyers, many investors in the housing market have begun to develop the building of new residential properties from swany condo communities to classic 3-bedroom, 2-bath single family homes. However, the limiting factor of building materials has slowed development, leading many market speculators to wonder whether or not developers will be able to build fast enough to meet the demand of current prospective buyers to develop a golden ration between demand and supply.
As demand comes down and supply slowly increases, many are speculating a decrease in revenue within the housing market in 2021. However, as new markets develop and the economy becomes more ‘normal’ keeping an eye on the home purchase market could be particularly lucrative for investors.
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