MORTGAGE MATTERS

3 min read

Aug 2021

The Latest Changes in the Housing Market

WHAT YOU'LL LEARN

Exactly how high home prices are reaching

Today's relationship between mortgage rates and applications

The latest information on what buyers look for

WHAT YOU'LL LEARN

Exactly how high home prices are reaching

Today's relationship between mortgage rates and applications

The latest information on what buyers look for

As you might know by now, the housing market set record numbers in 2020. According to a year-end analysis from Zillow, United States housing stock increased by nearly $2.5 trillion over the course of the year. That’s the greatest net gain for a 12-month period since 2005. Around $2.2 trillion came from the appreciation of current homes, and $274 billion resulted from construction. However, the extraordinarily strong year came as a bit of a shock to some.

Surprisingly, the COVID-19 pandemic didn’t slow down any interest from homebuyers. Demand grew for myriad reasons, but the ensuing competition among buyers led to properties racing off the market. During these ever-changing times, not much remains the same for too long, especially in the world of homebuying and selling. So, as we approach the end of 2021, let’s look at how the market has already changed over the past nine months.

Prices Are Up

Because so many people were still actively in the market for a new home by the end of 2020, prices around the U.S. skyrocketed. In August 2021, the median home sale price for the country’s second quarter sat at just under $375,000. During the same time frame a year prior, the median was around $322,600.

Overall, that's about a 16% jump.

Additionally, with the number of individuals purchasing properties being so high, there’s been a countrywide shortage of homes on the market.

To combat the home shortage, President Joe Biden introduced a $2.2 trillion infrastructure plan in March. The goal of Biden’s plan is to construct, maintain, and modernize more than two million affordable homes for low-income homebuyers. Still, the cost of lumber to build the homes continues to climb, according to data from the National Association of Homebuilders (NAHB).

And Buying Isn’t Slowing Down

In almost every corner of the country, people are still interested in purchasing a home, regardless of the trials and tribulations brought on by the pandemic. Whether it’s because they’re looking to find a better option for working from home or they simply don’t want to get caught on the outside looking in as the market gets hotter, many homes aren’t keeping their “for sale” signs up for too long. In February 2021, activity in the housing market was up almost 16% from the previous year, although some data suggests that numbers hit a plateau after entering the summer months. However, the “riskier” buyers who made their purchases at the pandemic’s onset might have left the market altogether.

Last year, some buyers exhibited hastier behaviors by using their retirement funds or taking out large loan amounts to pay for homes in all-cash. This trend might be slowing down, as several real estate agents told Forbes they saw “less sense of urgency” from the buyers in their areas in August 2021.

Mortgage Rates

At the height of the pandemic, mortgage rates hit all-time lows, and since June, numbers have continued to decline. By the second week of August 2021, 30-year mortgage rates dipped below 3% to 2.77%. Today’s mortgage rates are even lower than the ones experienced a year ago, and they don’t seem to be turning around any time soon. But as rates continue to go lower, mortgage applications haven’t seen the corresponding uptick.

According to the Mortgage Bankers Association (MBA), applications were down by about 1.7% at the end of July. When comparing the percentage of submitted applications to the same week in 2020, there’s a drop-off of nearly 20%. Even though nationwide homebuying continues to run rampant, the supply of homes is stifling what could possibly have been the largest boom period in U.S. housing market history.

Updates to Buyer Interests

Not all the recent changes have to do with numbers and data. There has also been a realignment in what is most important to buyers when they’re searching for their forever home. For example, a survey from Zillow to North Carolina homebuyers says 40% are only interested in purchasing a newly constructed home.

Similarly, only 35% of the respondents said they would consider buying an existing home.

One other development from the survey is that buyers are more inclined to purchase a home if they believe they’ll have the opportunity to generate revenue by renting, at least, a portion of the property to another individual, couple, or family. In total, 32% of respondents said the chance of renting out their home was a major factor in their decision to buy.

Looking Ahead

It’s hard to say where the housing market will stand at the end of 2021, and it’s even harder to predict the market’s state heading into next year. One might forecast the demand for housing could slow down as we enter the traditionally less competitive fall months. Although, that doesn’t mean the necessary materials to build more homes will recuperate by the winter or early 2022, so prices could stay where they are. Either way, the housing market will continue to develop with the ebbs and flows of a world always changing, so don’t be discouraged to apply for a mortgage or renovation loan, today!