Is the Covid-19 Fueled Housing Market Crisis Over Now?
There were a lot of things that people expected to happen during the pandemic.
The shortage of supplies.
Hospitals are running out of beds.
People having varied opinions about the pandemic.
But one thing that people didn’t expect would happen is for us to have a full-blown housing crisis in the middle of a pandemic. While it is not directly related to Covid-19, this housing crisis we are experiencing is an indirect result of the pandemic.
Just what happened, and are we in the clear now? Let’s find out.
The Covid-19 Housing Crisis
One of the things brought about by the pandemic was economic fears. The uncertainty was felt in small and big countries, and nobody was spared when financial markets plummeted.
This crash was the result of the low consumer sentiment brought about by the pandemic. People wanted their money on hand in case worst things came to worst. This resulted in one of the most significant stock market sell-offs in history, but it also started a trend of everybody waiting out how the pandemic will play out. One by-product of this is people not spending on large purchases of hard assets such as real estate.
However, as 2020 ended and news of vaccines coming out of research labs and the promise of a “new normal” were publicized, things took a different turn. Consumer spending is taking a positive trajectory, and people investing back in the stock market have escalated. The excellent news sparked this enthusiasm.
The housing market followed this positive trend, and with the mortgage rates at their lowest in years, people went on a homebuying spree.
The only problem was that there were no homes for sale. The number of active inventory for homes in November 2020 was only around half of the inventory in November 2019. This increased demand and low supply created a surge in prices. This perfect cake of a housing crisis is topped by the rising costs of building materials like lumber.
In the end, we have people looking for homes to buy without any new houses being put on the market. Prices are skyrocketing, with consecutive weeks showing price growth at double digits.
But it seems like this crisis has reached its peak. Experts believe that this housing nightmare is finally coming to an end. But what’s in store for the rest of us?
The End of the Covid 19 Housing Crisis
According to data from Redfin.com, the prices of pending homes in the market for the month rose only by about 9% – the slowest growth in record since June 2020. While the figures are still 15% higher than the previous year, experts believe this is the start of the end of the crisis.
“The housing market has clearly become slightly more favorable to buyers,” said Redfin Chief Economist Daryl Fairweather. “Homes are taking longer to sell, which gives buyers more time to make thoughtful decisions about whether to make offers. Home prices have plateaued, so buyers shouldn’t feel rushed to buy before prices rise further. And the fact that more sellers are dropping their list price is a sign that sellers have to be realistic about their price expectations.”
While this sounds lovely, this does not mean the prices will go crashing down in the next few months. After all, some areas in the country still have red hot markets for housing. But indicators seem to show that the market is in a correction and balancing stage, at least on a national level.
Here are a few points from the Redfin study that can give us a good idea of where the market is heading.
- Homes for sale were in the market for a median of 18 days which is a bit higher than the record low of 15 days back in June and July. However, a thing to note is that it is still down from 33 days from last year.
- Around 51% of homes that were up for sale were sold above list price. This is 19 points higher than 32% of last year. The good news is that this number has been falling since mid-July where it peaked at 55%.
- About 48% of the houses that went under contract accepted offers within two weeks of being on the market. This is 4 points higher than the figure from last year but is 8 points lower than the peak from this year.
The data points to the market easing, but market experts believe the bullish sentiment is still strong. We still see higher numbers of home tours and mortgage purchase applications. So there are still people eager to buy homes. The question is whether or not they will feel the pressure of buying above market price. With the decline in numbers, seasoned veterans in the market see this as the start of a turn.
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