Housing Market Acts As Undeniable Bright Spot in Recession
Volatility in the stock markets continues to be volatile, and the job market is still worse than it was before the COVID-19 plunged the US into recession.
However, there is still one undeniable bright spot for the US economy: the housing market.
Low rates have led to a rise in mortgage applications.
The Fed Reserve plans to keep interest rates near zero for the foreseeable future. This step will make financing even more affordable.
According to Esty Dwek, the housing market will probably come out as one of the winners in this crisis. Dwek is the head of the global market strategy for Natixis Investment Managers.
Strength in the housing market has powered the CNN Business Back to Normal index too. The CNN Business partnered with Moody’s Analytics to create the index. The index looks at various measures to judge economic performance.
In the housing aspect, the index includes daily new home postings from Zillow (Z) and weekly loan applications from the Mortgage Bankers Association.
Low rates are mainly the reason why home sales and prices continue to rise. The coronavirus pandemic is also prompting people in big cities to move from apartments for buying bigger homes in less populated suburbs.
Daryl Fairweather said in a report that a sudden rise in remote work had allowed homebuyers who were priced out in one neighborhood to look for more affordable alternatives.
The Suburb Exodus Continues
Redfin added in its report that many home sale prices rose 13% from the previous year to a record high of $320,000. The recent rise in pending home sales and new listings were their highest since 2015.
The West Coast housing market is incredibly hot. According to data from Meyers Research – the housing market and real estate analytics firm, Newsome prices rose solidly in July in Las Vegas, Phoenix, Denver, Sacramento, and Riverside in California.
Meyers Research report said that low mortgage rates and desire for more space pushed many residents into homeownership.
Lost Angeles and San Francisco residents are the ones leaving for other cities. However, even though prices could become too high at some point, builders may want the red-hot housing market to cool off a little bit.
The land is valuable yet a limited commodity. Builders are careful not to sell all their lots too fast so they may slow sales intentionally, the report added.
The current low mortgage rates allow builders to increase prices without crushing demand.
Fairweather also expressed concerns that home prices could eventually become too high. That would turn out problematic for renters who cannot cash in on an existing home to trade up.
The rise in home prices is making the housing market is making it difficult for first-time homebuyers currently. Price growth may also slow down in 2021, but even if it does, high home prices will continue to make affordability a big concern for homebuyers.
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