- Oops!Something went wrong.Please try again later.
The first thing potential home buyers hear from anyone familiar with the housing market right now is “don’t.”
Homes are going for tens of thousands of dollars over asking price, real estate agents are seeing more all-cash offers than they ever have before, and “For Sale” signs are being taken down just days after they were put up. It’s an impossible market for buyers right now, but a great one for sellers. And it’s causing many to wonder whether this year’s boom is similar to the one that preceded the 2008 market collapse.
Last year, sales of previously owned U.S. homes surged to a 14-year high, and many economists predict sales will break another record in 2021. The demand began during the first few months of the coronavirus pandemic, when people fled big cities and other urban areas for suburban and rural neighborhoods. And there’s no sign this trend is slowing down.
“Covid has catalyzed a rethinking of where we live, and why we live there, and where we work, and how we work,” Rich Barton, the CEO of Zillow, explained to the Wall Street Journal.
The result has been a fierce competition among buyers for a very limited number of homes. There are fewer new homes being built because of the pandemic, and older homeowners are more reluctant to sell. This means the homes that are available are selling for way more. It’s an “exhausting” and mad scramble, said California-based real estate agent Andrea White.
White told the Wall Street Journal that she couldn’t keep homes on the market for more than a few days. One of her homes, a three-bedroom located in Sacramento, was online for less than a day when White received an all-cash offer that was $21,000 over asking price. In many parts of the country, that’s the norm right now.
A similar situation began to unfold in 2006, just a couple of years before the housing bubble burst and the economy fell into a deep recession. But there are a few factors that make this boom different and, one hopes, more secure than the last.
The first is that banks aren’t handing out mortgages willy-nilly as they did in 2006. Buyers are required to have much higher credit ratings these days, and down payments are also more expensive. The hope is that requiring higher incomes and more cash upfront will prevent a serious crash because fewer new homeowners will default on their mortgages, meaning that lenders won’t suffer massive losses and the financial system will remain stable.
The second factor is demand. The coronavirus pandemic may have triggered this past year’s housing boom, but demand will likely remain high as millennials begin to settle down and the economy continues its recovery. As long as people continue to flee big cities, houses will get snatched up quickly.
Washington Examiner Videos
Original Author: Kaylee McGhee White
Original Location: Housing market craze