Even after reaching all-time high average prices and sales numbers not seen since the height of the 2000s boom, the housing market still has lots of room to run, experts say.
There was fear early this year that price levels had outpaced income growth and become unsustainable — but record-low mortgage rates and promises by the Fed to keep U.S. interest rates at zero through at least 2023 have lit a new fire under the market.
According the Fed chair, Jerome H. Powell:
“Overall activity remains well below its level before the pandemic, and the path ahead remains highly uncertain”
What’s Happening Now
Existing home prices hit a record high average of $310,600, up 11.4% year over year, and the overall U.S. home price average was a record $319,178 in August, a 13% gain over 2019.
Not only that, but new homes sales broke the 1 million mark for the first time since 2006 last month, rising 43.2% from last year and up 4.8% from July.
Danielle Hale, chief economist for Realtor.com says:
“Weekly home price data show that sellers are raising asking prices at a double-digit pace, and surprisingly, eager buyers are willing to give them what they’re looking for.”
It’s not just low interest rates pushing the market forward.
Older millennials, a historically large generation, are reaching their late 30s — an important marker, as there has been a persistent 20-percentage point gap between the percentage of homeowners under 35 and those 35–44.
In addition, homebuilders have been slow to start new housing since the global financial crisis, limiting supply.
It’s true that the global pandemic has affected the market, giving it energy to stay afloat. But, what's really driving things is a new "migration" out of major population hubs like New York and San Francisco and into lower-cost suburban areas and smaller, more affordable cities.
To Summarize
As long as interest rates remain low you can continue to capitalize on those low interest rates at these high prices.
