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In recent years, the housing market has grown stronger, especially during the COVID-19 pandemic. Mortgage rates reached historic lows, buyer demand surged, and home values skyrocketed. Finally, it has resulted in housing becoming one of the few positives in an otherwise depressing period.
However, the property market is constantly changing, and fashions in the industry come and go. You can’t depend on things remaining stagnant for very long when you consider how locally specialized this business is and how diverse the conditions are in each city, state, and metro area.
Fortunately, knowing the basics of the market can assist you in keeping up with all of these developments. Scroll down for the most recent real estate trends of the month, and take a look at some of those fundamentals below.
Local buyer demand and the amount of home supply that is on the market are two factors that have an impact on house prices. In general, rising housing costs are a result of insufficient supply and high demand.
Mortgage rates may also be important since they affect demand. There is typically increased interest in purchasing properties when rates are lower. Demand may somewhat decline as rates climb.
Home prices have been increasing nationally for some time. The median price of a home was little under $347,000 as of the year 2020. Prices for homes increased by 11% just in 2020.
Affordableness is not solely a function of home costs. In addition, incomes, inflation, and interest rates are important. Thus, increased costs? They don’t always imply that houses are becoming more expensive. Homebuyers may potentially be able to afford more home than they previously could if rates are especially low or salaries are rising.
Thankfully, that is precisely the situation we are witnessing right now. When rates, income trends, and inflation are taken into account, consumer purchasing power for homes increased by 21% by the end of 2020.
The housing industry is heavily influenced by mortgage interest rates, which have an effect on demand, home prices, and affordability. The Federal Reserve’s policy, the bond market, investor interest in mortgage-backed securities, and, of course, inflation all play a part in their daily fluctuations.
According to Freddie Mac, mortgage rates were close to all-time lows in the beginning of 2021. A 30-year fixed-rate mortgage’s average rate was at 2.74% in January, up from 3.62% the year before and 4.76% ten years earlier.
The supply of homes that are currently up for sale, or housing inventory, is another significant aspect of the housing market. A seller’s market is one that exists when there is little supply and plenty of demand. Home prices are rising, exploding, and sellers are in control of the negotiating table.
On the other hand, buyers typically have the upper hand when inventory is low. There are more listings available than there are buyers to acquire them in a buyer’s market. As a result, price rise is slowed and the market as a whole becomes less competitive.
In terms of the current inventory, supplies has been quite low recently, and the coronavirus pandemic made matters worse.
Another area of the market to pay attention to is mortgage delinquencies and distressed properties like foreclosures and REOs, especially if you’re an investor. Both of these frequently increase during difficult economic times. (An example would be the approximately 3.8 million foreclosures that occurred during the financial crisis more than ten years ago.)