Today’s Housing Market vs Yesterday’s Housing Market - What’s Changed?

Today’s Housing Market vs Yesterday’s Housing Market - What’s Changed?

They say history repeats itself and some headlines will go as far as to say that the current conditions in the housing market will return to pre-pandemic levels. While the intentions may be good with statements like this, the reality is that there is no way of going back. Not that we should want to anyways. 

The pandemic came around and changed the way many industries performed their business and the housing market received a much needed revamp. Throw in the increasing demand of real estate, coupled with the shortage of units and what we find is that the current market conditions are FAR from what we used to call “normal”. Here are 5 ways in which the market has changed for the better.

1. Mortgage Rates

The most noticeable changes happened with the rates at which potential homebuyers would be able to borrow money. Being one of the main factors in buying a home, when compared to the 30-year mortgage rate chronicled by Freddie Mac, we can see the average rates by decade:

Compared to where we are now, you can call up your loan officer and with prime conditions they could offer you rates as competitive as 2.87%. This alongside other factors not only make it easier to borrow, it also makes it more affordable and attractive. 

2. Home Price Appreciation

Let’s jump into our time machines and head back to the year 1995. This was the year Black Knight, a housing data and analytics company, released a study that found that on average, homes would appreciate by a modest 4.14%. 

Jump forward to where we are now and the latest forecast puts us at an explosive 14.1% home appreciation rate! SO not only do current market conditions allow us to borrow money at more affordable rates, the ROI is also higher due to the next factor playing into all of this.

3. Months’ Supply of Inventory (Homes for Sale)

Depending on where you lived, this may have been a familiar site to see during the rise of the pandemic. This is also a good representation of the current unit shortage in the housing market as we hover around some record lows. 

According to NAR:

“Months’ supply refers to the number of months it would take for the current inventory of homes on the market to sell given the current sales pace. Historically, six months of supply is associated with moderate price appreciation, and a lower level of months’ supply tends to push prices up more rapidly.”

A look at the latest Existing Homes Sales Report from NAR, shows that we are currently at a level of 2.6 months of inventory. That is less than HALF of normal supply. Some attempts are being made to add to the current demand, however it is challenging to say that we will return to normal levels any time soon.

4. Days It Takes To Sell a Home

The shortage of supply directly ties into this next change as well. Since demand continues to grow and supply continues to dwindle, potential homebuyers are thrown into a free-for-all with other homebuyers as they compete over the same homes. 

Homebuyers are pinned and must either learn to make decisions fast or risk having to miss out on a home. These are favorable conditions for sellers as it means fewer days on the market.

The days-on-market metric gives an indication of how hot a market is and how quickly homes are selling. In 2019, prior to the pandemic, the average days on market stood at 35 as found in a study published by NAR. Today, that number is cut in half and is now at 17 days.

Another factor that plays into this is that real estate agencies have had to learn new ways of streamlining their process. New software has been developed, new strategies for showing homes, and a switch over to online paperwork make it much easier to buy and sell homes. 

5. Number of Offers per Listing

The major revamp in the online presence of real estate agents and of the housing market overall has attracted way more potential buyers than we’ve seen in previous years. The streamlining of the process has made it so that more people can feel confident about pulling the trigger and diving into the world of investing.

However, as mentioned before, this has been met with a limited amount of supply and as such the units that ARE available are being flooded with offers.

Hotspots like Florida, CA, Idaho, Texas, etc. are also experiencing a new trend.

Due to a majority of people being able to work from home now, the flexibility of being able to live in a more affordable state while making higher than average wages has enticed buyers to buy homes out of state. In some cases, these out of state buyers are used to much higher real estate prices and can afford to make higher offers, making it more challenging for any locals who are living off lower wages. 

An already cut throat industry has sharpened the blade and changed the way we look at investing forever. Any attempts to go back to how things were before would simply be blocking progress during a time where progress is the only chance for survival.

Bottom Line

When…

…it’s easy to see that resistance is futile and change is inevitable.

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