Taking the "Crazy" out of the Market
The current “”crazy” real estate market in the 405 has been the result of a convergence of numerous supply and demand factors.
Home builders have been underbuilding during the last decade, contributing to low inventory and higher demand for existing homes.
To understand the dramatic impact of underbuilding, consider these numbers from Robert Frick, Corporate Economist with the Navy Federal Credit Union. In the U.S., since 1950, home building has supplied from 20 to 27 million homes in every decade, until the last one. From 2010 – 2019, only 5.8 million homes were built – basically only a quarter of the homes than in the past 50 years. This is the most important signal that it will take to increase our inventory supplies.
More homeowners are staying put, enjoying their low interest mortgages, or even a debt free home, causing upward pressure on existing home prices. The March 2022 national median sales price was up 16.7% from a year earlier. The number of sales are down 6.5% from last year.
Several metros across the nation are very recently seeing lower median home prices, mostly due to an influx of smaller homes coming to the market.
On the demand side, the millennial generation is buying homes in large numbers, incentivized by low interest rates, which are still reasonable, despite the recent upward tick to the 5% range. We’re seeing a surge of these buyers, who have delayed household formation and home buying longer than their parents.
Compounding the effects of the pandemic to an already low inventory/high demand market has caused us to see our homes through a different lens – a sacred space to work, learn, play, and feel secure. The last couple of years has only enhanced the value of what we love about “home.”