Are you waiting until the housing market slows down and prices dip before buying? You’re not alone, and that is one of the most common comments we hear from home buyers today.
But here’s the reality – the dip in U.S. housing prices may be a long way away.
Why Is Housing In Such High Demand?
Based on the number of real estate showings by Realtors across the country, the best time to have negotiated a strong offer on a home was April of this year.
According to ShowingTime, a tool that tracks real estate showings in America, interest in U.S. housing has skyrocketed in the last three months.
Not coincidentally, so has the cost of lumber. Home builders across the country are seeing more demand for new housing than any other time in recent history, and all that demand has nearly tripled the cost of lumber since early April.
Demand for housing is strong. Many of us who were, or are, locked up at home with stay-at-home orders have clearly realized that our current situation does not fit our new at-home lifestyle.
Many living in dense, urban areas have been freed from those city centers, and knowledge workers increasingly have the ability to work from home or anywhere they have a good internet connection.
According to Realtor.com, 63% of potential homebuyers said they plan to buy a home based on their ability to work remote.
What Is High Demand Doing To Supply?
If you divide the number of homes currently for sale in the country by the number of homes that are selling per month, you will get the Monthly Housing Supply figure. Thanks to all of this demand for housing, this figure has hit a new, multi-year low. When housing supply drops like it has this year, it tells us there are more buyers hitting the market than there are sellers placing their homes for sale.
What we are seeing is a shift from renting to buying, and a shift from the desire for small living spaces to the need for larger homes that can accommodate a live-and-work at home lifestyle.
Make no mistake, this is a tidal-wave sized shift in the wants and needs of today’s home buyers. This shift occurs after a ten year glut in new-home construction. Going back to 1959, U.S. Housing Starts (new homes being built) have averaged approximately 1.5M per year. Looking back since 2007, housing starts have been significantly less than the historical averages.
This lack of new-home construction over the last thirteen years is directly related to the extreme low inventory we are seeing in many desirable locations across the country today. It’s also one of the biggest catalysts for higher prices going forward.
But it’s not the only catalyst for higher home prices. According to Freddie Mac, interest rates have hit a near all-time low and are expected to go even lower in 2021.
As home prices likely continue to rise higher, interest rates should stay low and keep housing affordable and demand strong.
Bottom Line
What we are seeing today is a perfect recipe for higher U.S. housing prices:
- Higher demand due to the freeing of knowledge workers from urban areas and the need for combined work and living spaces.
- Low supply of housing for sale due to the significantly low number of new housing starts since 2007.
- Historically low mortgage interest rates that are forecasted to continue, making housing very affordable even at elevated prices.
In order for the housing market to dip, we will need to see the forces at play above change direction. It’s unlikely that will happen anytime soon, however, and those waiting for the dip could end up missing out on a significant amount of future home equity.
In other words, if you are considering buying a home do not wait any longer! Home values are going to continue to increase as will demand and competition.
We believe buying a home should be simple, low-stress, and fun. If you’re ready to start the process, fill out the form below to request a free Total Cost Analysis. This detailed report will help you determine which mortgage option fits your needs with the lowest overall cost. It will also show you strategies to increase your equity and wealth in real estate by choosing the best mortgage strategy for your situation.
