The Double Edged Housing Boom Lawrence Yun, NAR Chief Economist
(Published on - 11/17/2020 4:33:11 PM)
Taken from the November - December 2020 REALTOR Magazine (not in its entirety):
The housing market is in a clear V-shaped recovery. Sales for both existing and new homes in August hit their highest mark since 2006. Buyer activity this winter is unlikely to chill: Mortgage applications for home purchases are up about 30% compared to a year ago. Due to the extraordinary demand, home prices have reached an all-time high.
Such a frenzy, reminiscent of 2006, raises questions about a bubble and the potential for a painful crash, but there is no comparison. Adjustable rate mortgages and the lack of documentation required by some loans were the norm back then. Today, buyers are taking out 30-year fixed rate mortgages and are actually living in the homes; during the crash there were many vacant homes purchased by speculators who never occupied them.
Fourteen years ago, there were 3.8 Million homes listed for sale, and home builders were putting up about 2 Million new units. Now, inventory is only about 1.5 Million homes and home builders are underproducing relative to historic averages.
Escalating home prices could soon cause another kind of damage: shutting out first-time home buyers. That is why more supply is very critical. Only when home prices rise roughly in line with income growth can we say a market is in equilibrium. Even in the outer-skirts of our local Phoenix metropolitan area sales are brisk and competition is fierce. There are wait lists for new build product, too. Something we hadn't seen in a long time!
