How the Housing Market Get So Crazy

The whirlwind housing market is made possible by a perfect storm of situations and we want to take a look at when it will normalize again.

If you’ve tried to buy a house in the last few months, you’ve probably noticed something for a whirlwind. Sellers are walking away with much more than their homes are worth, and buyers are walking away with frustration and huge mortgages.

Historically Low Mortgage Rates

Whenever mortgage rates drop, the housing market feels it. This opens the door to new home buyers that weren’t sure if they could ever afford a house. It also helps current homeowners upgrade their digs without necessarily changing their monthly payments. With more buyers on the playing field, the competition for available houses increases.

Low Inventory

Two elements from the global pandemic impacted the housing marking immensely. First, a shortage of goods made building new houses more expensive and time-consuming. Buyers who could usually see a house completed in six months found themselves paying more for materials and having to wait longer. Those who didn’t have time to waste jumped into the ring to purchase used homes, which only drove up the competition.

The second impact of COVID-19 was homeowners delaying the sale of their homes. Whether people were scared of having strangers who could pass along their germs in and out of the house or they decided to just wait out the pandemic before they moved on, the number of houses for sale wasn’t what was expected.

Staying At Home in a Nicer Home

With stay-at-home orders and work-from-home opportunities, people started looking for better homes for themselves and their families. A family in New York City, for example, might decide to move somewhere with more space and larger properties. They can still work remotely at their job in NYC but can enjoy more space for social distancing.

Families that decided not to move across the country still may have needed additional space for their home offices, virtual school environments, and just space to not annoy each other too much.

What’s So Crazy About The Housing Market Anyway?

When there is a low inventory for something that has a high demand, things can get pretty crazy. Homebuyers are seeing multiple houses and making concessions on which ones to throw offers at. It used to be that you could take time to think about a house before you bought it. In the current market, if you don’t make an offer right away, the next person will.

Buyers also find themselves in bidding wars. That means houses are being purchased well above the asking price. Buyers also have to consider forgoing other regular elements of the process like inspections, appraisals, and negotiations.

While sellers are ecstatic to see their houses go from such high prices, many home seekers are discouraged and frustrated. Many find themselves stretching their budget to make more competitive offers while other compromise critical elements of their home search.

While some believe that the perfect storm that created this extremely competitive housing market is cooling down, others believe we’re just in the eye of the storm. The reality is, things may never go back to the normal we once knew. The crazy housing market may just be the new normal.