Real Estate Prices Surge Amid Red-Hot Demand
April Prices Set Records
Home prices have skyrocketed to record levels amid low supply and red-hot demand. As of the end of April, the price for an average home in the US was up 11.6%—the biggest jump seen in 16 years. For some, the current real estate environment is reminiscent of the housing bubble of the mid-2000s. During this period, prices soared and then fell, which resulted in a period of foreclosures.
However, current housing trends are different from what they were during this period for a number of reasons. Most buyers in the market today are well qualified to apply for mortgages and can meet their monthly mortgage payments. During the housing bubble, speculators used speciality loan products to buy and flip homes.
Homes Selling Rapidly
Despite the increase in home prices, sales are happening at record paces. Nationwide, on average it takes about seven days after a home is listed for an offer to be accepted. In hot areas of the country including Kansas City, Columbus, and Cincinnati, homes are selling three days after being listed, on average.
Some areas like Austin, Phoenix, and Salt Lake City are seeing double-digit increases in home prices. Rents are also appreciating, rising 3% annually, marking the biggest year-over-year increase since March 2020. Austin, Memphis, Tampa, and Phoenix are seeing the most extreme increases in rents.
Prices Will Remain Elevated
With mortgage rates expected to stay low and demand among millennials forecasted to remain high, prices should stay elevated for some time. Even with builders adding more inventory, there is still a lack of supply. It does not help that this surge in demand is coming on the heels of a decade of underbuilding. As a result, homes are forecast to appreciate 11.8% through next April and end 2021 10.3% higher year-over-year.
Ever since the pandemic prompted an exodus out of cities, the real estate market has been booming. With interest rates still low and demand not abating anytime soon, it will be interesting to see how builders and homeowners respond.
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