As the world economy struggles with the ongoing pandemic, many of us assumed that housing prices would start to drop. After all, millions have lost their jobs, and homebuying should have dwindled, right? However, in contrast to our presumptions, the housing market is still sturdy, and home prices continue to soar. While this may be confusing for homebuyers, industry analysts have pointed to several factors as to why this phenomenon is happening.
- Low-Interest Rates
One of the significant factors that have prevented the housing market from crashing is the incredibly low-interest rates. In previous years, interest rates would be relatively high, leading to an overall decline in the number of homebuyers. However, given the pandemic situation, the Federal Reserve lowered the interest rate to stimulate the economy. As a result, many homebuyers now have access to lower-cost mortgages.
- High Demand for Homes
Another reason that the housing market is strong is the high demand for homes. While millions of Americans have lost their jobs due to the pandemic, many others are still employed or have savings. With low mortgage rates and lower prices on the horizon, many people have decided to invest in a home. Additionally, several families shifted to remote work, and therefore require larger homes that can accommodate family members with different needs.
- Less Inventory in the Market
The third reason why home prices aren’t crashing is that there is less inventory in the market. Due to the pandemic, many people are hesitant to put their homes up for sale, leading to a reduced number of homes on the market. This creates fierce competition among homebuyers, causing prices to remain high.
- High Construction Costs
Finally, the exorbitant cost of building new properties is another factor contributing to the soaring home prices. With high construction costs, developers are finding it challenging to build affordable new housing units. This issue is mainly because of the lack of workers in the construction industry, as well as the rising cost of building materials.
In conclusion, the housing market remains stable despite the ongoing pandemic situation. With a combination of reduced mortgage rates, increased demand, less inventory, and high construction costs, the housing market continues to remain strong. Homebuyers may find it difficult to obtain a home given the present circumstances, but industry experts suggest that the market may balance out in the future. It’s crucial for homebuyers to educate themselves regarding the current market trends before investing in their future homes.
