The housing boom: How it happened and where it’s headed

Real_Estate

The housing boom: How it happened and where it’s headed



at the onset of the pandemic, there was a wide consensus in the real estate industry that we were heading for some type of housing slump. And look, it made a lot of sense. The unemployment rate in april 2000 and 20 had shot up to an 80 year high, almost 15% the highest since the Great Depression, 7.2 million homeowners went into emergency for parents in some states during the lockdowns weren't even allowing in person real estate showings. So a housing slump made a lot of sense. It's not at all. What played out what came next was one of the hottest housing markets in U. S. History since august 2000 and 20 Home prices are up 19% That's greater than any period in the lead up to the 2000 and eight crisis. But the big question now is what comes next, because prices can't continue to grow at this rate forever, It's just not feasible with the level of income growth. And what we've seen is that although there's a consensus that growth will slow next year, there's not a consensus of what it will look like. Zillow is estimating that home prices will rise 14% next year, you have corelogic estimating 2% and then you have the Goldilocks, Fannie Mae estimating an 8% growth next year. How do you have forecast, ranging from 14% to that's because there's a huge unknown in the housing market right now and it's mortgage rates inflation is rising faster than was expected and it looks like it's going to be stubborn, it's going to be here for a little while. And so that means the Federal Reserve is more likely to up mortgage rates sooner than was expected. The covid 19 housing market, This boom that we've seen has been driven by a number of factors. First and foremost, mortgage rates, which declined to under 3% the average for the 30 year mortgage rate. And of course, if mortgage rates decline, that means buyers get more bucks for their dollar and they can go higher. And remember the emergency forbearance program was issued in March 2000 and 20 and what it is, is borrowers did not have to pay on their mortgage and there wouldn't be consequences if they didn't. Four balance is always existed. But the Covid 19 1 was unique and that mortgage borrowers did not have to show that they were in financial distress at a tight, there were 7.2 million people in the forbearance program. We've since seen that wind down to about a million and it will continue to decline throughout this year As the program winds down next up is work from home that allowed virus to spread further out into the suburbs or even move states to more affordable locales. And so that just increased the number of sales and more demand. And then the other big one, which was already underpinning the housing market before Covid even hit is demographics. We are in the period where the five largest birth years for millennials, those for 1989 through 1993 are all hitting the all important first time home buyer and year of 30. And so we are seeing them all start to shift into the housing market. Right as this pandemic hit. Unfortunately for struggling homebuyers, it's unlikely that we're going to see prices fall. It's historically very uncommon. And right now there's just so many demographic factors that are pushing the market forward for the next coming years. But what is very likely is that home price growth will slow, 19% isn't sustainable. There will be fewer bidding Moore's going forward, but home prices are still going to rise at least. That's what all of the forecast .2.