The Housing Boom of 2021
Seeing the rise in housing prices and the lower than usual interest rates is an encouraging sign for home buyers, but it does bring up some familiar concerns from the early 2000s. Typically, when people consider a housing bubble or boom, it is only a matter of time before it bursts or collapses. Therefore, is the early increase in housing numbers a sign of future economic concern, or is it merely a result of supply and demand shifts. COVID-19 has changed the game in real estate, and that could be playing a more significant role than anything else.
Signs of a Housing Boom
There is no denying that the United States is experiencing a housing boom. While many Americans are facing evictions and foreclosures, the real estate market is healthy and thriving. Home values are on the rise, and the migration from busy cities to suburbs is forcing an increase in demand on a limited supply, meaning that real estate agents are commonly dealing with multiple bids on houses. Another reason the market is booming is because of the historically low-interest rates that are making it more affordable to get a mortgage.
Income and the Current Economy
People might be worried about some similarities between current projections and the housing crash of 2008. For example, as in the mid-2000s, personal incomes are not rising as fast as home prices, potentially indicating future concerns of affordability. However, unlike during the housing crash, people are now required to go through multiple steps to ensure they can afford their properties, meaning the purchasing process is more complex to deter and avoid future problems and potential economic threats. Therefore, while incomes are not rising at an equivalent rate, safeguards are in place to prevent another devastating collapse.
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Risks of Another Collapse
The real estate boom that resulted in the Great Recession was not only the result of a nationwide price spike in houses; the poor ethics of lenders fueled it. Greed was the ultimate contributor to the Great Recession, a lack of empathy driven by monetary gains.
The truth of the current market is that supply and demand, the results of a healthy economy, are fueling the changes. People want more suburban homes, but there aren't enough for sale, meaning that the available homes' value goes up exponentially, depending on the level of interest. In other words, it is a seller's market.
Potential Opportunities in Rental and Sales
If you are an investor, now is the time to enter the market or offload specific properties. According to most data, rental rates are remaining stable and profitable. Also, with the increasing house prices, it is an excellent time to invest in a fixer-upper. For all the retirees out there, if you ever wanted to invest in real estate or if you’re considering selling your home and downsizing, now is the time.
There is no denying that the country is currently in a housing boom, but that does not mean it is heading for another Great Recession. While home values have skyrocketed and interest rates are dropping, it seems it results from a healthy supply and demand cycle. What are your thoughts on the current housing market? Leave a comment.