The Housing Boom: How Much Faith Can You Have in the Current Market?

Despite an ongoing pandemic, the housing market has seen record-setting numbers as it shifted from a buyer’s to a seller’s market. Despite an initial slowdown at the peak of the COVID-19 crisis, September and October saw a rising trend in house sales that has lasted for 10 months. 

The remarkable growth in the housing market has many economists and investors on edge, believing a bust is inevitable after such a booming market. Fortunately, continuing trends do not appear to correlate with such fears. Despite a market slow down over the last several weeks, houses are still selling about 28 days faster than year-over-year data. Currently, all signs point to a quiet return to normal, not a drastic collapse.

Current Market Predictions

With the market still healthy, what does it mean for potential investors or sellers? Currently, the market is still a seller’s market. There is not enough inventory for supply to outweigh demand. However, realtors are noticing an uptick in supply. While the supply is steadily increasing, houses are still priced above previous year-over-year data, but the numbers are slowly falling back toward equilibrium. 

One driving force in the current housing market shift, especially among middle and upper-class homebuyers, is the current lumber shortage. With construction delays, many people are buying existing homes rather than opting for new construction.

The primary concern for investors is how long the housing boom will last? Unfortunately, there is no precise prediction at this time. The most recent data suggest the housing market will maintain its current health throughout the year, likely ending more than 10% above previous year-over-year data. However, as with any investment, there are risks to consider.

Unpredictable Variables

As the world saw last year with the pandemic, the market is not invulnerable to outside influence. There is more than property driving the real estate market. Keen investors must also pay attention to jobs reports, trade agreements, and individual state markets. Staying aware of the overall health of the economy is crucial to any solid investment.

Selling or Buying in the Current Climate

For sellers, the market is still in your favor. While there is an increase of houses on the market, it is still not enough to satisfy demand, meaning you still have the potential to set your asking price or motivate a bidding war to get the best price. However, you should know the current bubble is limited, and economists already see signs of a resurgence in supply.

For buyers, within a year or so,  you will see the market stabilize with house prices moving back toward equilibrium. If you are not in desperate need of a new home, consider waiting to get a better deal. While home prices are currently more than they were a year ago, they are less than they were a couple of months ago.

The current housing bubble is unsustainable. While it doesn’t appear likely to burst and cause an economic collapse, its growth is beginning to slow. The current market is a textbook case of supply and demand. The pandemic limited supply despite demand remaining, causing prices to skyrocket. While the current housing market is ideal for those interested in selling, buyers might want to hold off if they can. 

What do you think of the current housing boom? Are you going to take advantage of it or not? Leave a comment below to keep the conversation going.