The pandemic affected many markets and industries around the world, both positively and negatively, but the US housing market seems to have reached new heights because of it, with sales reaching numbers higher than those recorded in the past 15 years, and it’s only looking up from there on out.
However, this doesn’t mean everybody was a winner, quite the contrary actually, as only sellers were able to profit off the market’s growth, with many unlucky buyers left to another year of renting whatever acceptable place they could come by.
Home prices shot through the roof, increasing by over 20% compared to last year’s third quarter, making it the largest home value increase in the history of the Federal Housing Finance Agency’s books.
And they weren’t just selling at record high prices, as homes were practically flying off the shelves, with multiple competing bidders and in extreme cases even large numbers of full-cash offers which usually take the cake.
On the other hand, those who weren’t quick enough or just couldn’t put up as much cash as others could be left empty-handed, missing the extremely low mortgage rates that the Federal reserve had proposed for 2021.
Naturally, the surge in home rentals pushed their price up as well, causing massive losses for those who were already renting and were not even considering becoming a homeowner.
The US is running out of affordable housing options
Matt Holm, a Compass agent claims that a house he put up for $425k in late January this year had sold at a 30% higher price, with numerous bidders competing and finally driving the 5-year-old home’s price to a whopping $545k.
Some buyers which bought lakefront homes for heft amounts ranging in the $5-6 million pricetag were soon offered nearly double what they had originally paid for their home as the demand for such housing skyrocketed.
Naturally, most real estate agents will advise you not to sell a home like this, because they could easily be worth three to 5 times more the following year, and you’d just be losing out on free cash if you sell it right away.
Unfortunately, this high demand has severely depleted the inventory of the housing market, leaving few affordable and acceptable homes on the market, which had already become like the wild west, with some buyers going as far as offering to purchase the seller’s next home for them, or even paying off other potential buyers with thousands of dollars in cash.
By the end of the year, homes costing under $200k were nearly impossible to come by, with their number dipping by nearly 20% compared to last year’s.
On the other hand, homes above $600k had never been more popular, even among newly constructed homes, where building companies reported a 19% drop in low-cost home projects, which greatly impacted the first-time buyers.
Despite all this, soon to be first-time homeowners are feeling pretty optimistic about 2022, and while financial experts have warned that mortgage rates could climb to 3.7% by the end of the year, the market’s growth will likely slow down and allow for smaller-budget buyers to get a piece of the housing cake.
All in all, the US housing market has gone through quite a roller-coaster ride this past year, and 2021 might be just as bumpy of a ride, but if you manage to stay afloat until 2022 and then some, you’ll likely find yourself with a pretty nice return on your investment. There’s never been an easier or safer way to invest money for the long run.