Quote:
Originally Posted by zx10guy
Yes, demand is rising. But I think it's fueled by irrational exuberance. Yes, supply hasn't kept up with demand over the years. But you haven't explained why in one year, all these buyers just woke up and had to jump in now to get a home. These people are living some place WITH roof over their heads. Per my post, I don't see any of these new buyers being from the pool of homeless people that NEED a roof over their heads. Certainly, the demand in previous years doesn't justify the double digit acceleration we're seeing now that literally has happened overnight.
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Theres a ton of factors influencing the housing market skyrocketing over the last year.
Residential construction of new single family homes was down in 2020 due to the pandemic and shutdowns. That affected an already low amount of supply. Once they got back to building, material/labor prices skyrocketed which led to an increase in pricing on new homes.
Home sales in 2020 also dropped to the lowest amount since 2010 while everyone was unsure of what would happen with the pandemic. This affects how many people are currently looking for homes. Its not that they no longer needed/wanted to buy a house during this time, they just put off the purchase until there was more stability.
Then you add in the stock market's and crypto's performance over the last year coupled with low interest rates, and there are more people that can afford to buy a home.
And you add all that together with people that are seeing the market surge, and are moving up plans to buy houses now instead of later so they dont get completely priced out of the market later.
This all created a perfect storm of an increased number of people now looking for homes and a decreased number of available homes which led to a sellers market and a huge increase in home prices.
Now, home sales are down in the last couple months from earlier this year, but we are still above pre pandemic levels as inventory is still low and pricing has skyrocketed. As pricing comes down though, you will have sales rebound. I personally dont see prices will come crashing down to pre pandemic levels though, as we already see home sales starting to level out as pricing has taken a small dip and new homes construction has increased. I agree, it sure seems like its a bubble waiting to pop, but that has been said for the last 5+ years and it hasnt happened yet as prices have continued to soar in many places.
My house for example was bought in summer 2017 for 400k, summer 2018 refinanced and appraised for 550k, winter 2019/2020 neighbor sold their house for 750k (comparable house), summer 2020 refinanced and appraised at 760k and spring 2021 neighbor sold their house for 850k (comparable house). I am in a more rural area of northern colorado, but the town itself has increased from a population of 20k in 2017 to over 30k in 2021. And colorado's market has typically always been a sellers market for the last decade plus.