The Housing Boom Could Continue for Years
Home Prices and Sales Are Climbing
The housing market has boomed in 2020, and analysts say this trend could continue for years to come. Recently, average home prices and sale numbers have reached levels not seen since the 2000s.
In August, the overall US home price average was a record $319,178, up 13% year over year. New home sales exceeded 1 million for the first time since 2006 in August, marking a 43.2% jump from last year.
The Pandemic Is Not the Only Reason for the Boom
Low interest rates are certainly a factor contributing to the boom in demand for houses. Additionally, the COVID-19 pandemic has spurred many to buy homes sooner than they might have otherwise, because they are looking for more room to work and sequester. People are moving out of urban centers like New York and San Francisco and settling in more affordable suburban areas like Phoenix and Boise, and concerns about COVID-19 are a contributing factor for some.
Though the pandemic has been the catalyst for many home-buying decisions, analysts say there are other trends which will continue to fuel demand for housing even after the pandemic subsides. Older millennials, the country’s largest living adult generation, are reaching their late 30s. This is a time in life when it is common for people to become homeowners. For decades, there has been a 20-percentage point gap between the percentage of homeowners under 35 and the percentage of homeowners between the ages of 35 and 44. If this trend continues, a wave of older millennials may be looking to purchase homes over the next five years.
Home prices are climbing because of rising demand coupled with limited supply. Since the global financial crisis of 2008, homebuilders have been reluctant to construct new housing. Yet despite climbing prices, many homebuyers’ monthly payments are relatively small, thanks to low mortgage rates.
The Federal Reserve has promised to keep interest rates at zero through at least 2023, meaning that this trend could continue. Leaders in the real estate industry, as well as homeowners and potential homeowners will be eager to see if demand for housing stays strong in 2021 and beyond.
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