Published Date 3/29/2021
To get some perspective on what is going on in the residential real estate market, look no further than a bit of historical data. In 1940 the median price for a home was just $2,938. In 1980, it was $47,200, and by 2000, it had risen to $119,600. Even adjusted for inflation, the median home price in 1940 would only have been $30,600 in new millennial dollars, according to the U.S. Census Bureau. Fast forward to now, and the median home sale price increased 16% year-over-year to $331,590 – an all-time high, per a report this week from Redfin. You'd think it would slow down interest in buying a home, but it doesn't seem to be stopping buyers from snatching up homes days after they're listed.
According to HousingWire, during a four-week period ending March 21 and covering 400 metros, 58% of homes that went under contract had an accepted offer within the first two weeks on the market. And between March 14 and March 21, 61% of homes sold in that timeframe had been on the market two weeks or less, and 48% had sold in one week or less.
On top of that, nearly 40% of homes sold above their list price – another all-time high – and 15 percentage points higher year-over-year. "The average sale-to-list price ratio, which measures how close homes are selling to their asking prices, increased to 100.2%," says HW.
So what happens after mortgage rates, inventory, and building material costs recover to pre-pandemic levels? HW cites National Association of Home Builders Chairman Chuck Fowke, who noted that supply shortages and high demand have caused lumber prices to jump "about 200%" since April 2020, and the elevated price of lumber is adding approximately $24,000 to the price of a new home.
They also quote Redfin chief economist Daryl Fairweather: "When the pandemic is over, purchasing a home is going to cost much more than ever before, putting homeownership much further out of reach for many Americans. That means a future in which most Americans will not have the opportunity to build wealth through home equity, which will worsen inequality in our society."
But Fairweather notes that while the new administration's hopeful $3 trillion infrastructure plan includes building 1.5 million sustainable homes, there is no guarantee the bill will end up including it, and notes that America needs an audacious goal to increase the housing supply, given the U.S. is short 2.5 million homes. "It may be expensive to build millions of homes, but ignoring the problem would only cause housing to become more unaffordable and worsen housing insecurity."
She cites experts who say the best chance at home prices lowering is the continued rollout of the COVID-19 vaccine, which will permit lumber mills to reopen, material prices to lower, and builders to spend less on new builds.
Source: HW | TBWS
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Omniscient Real Estate Finance Corp.
2602 Oakstone Drive, Columbus OH
Company NMLS: 796590
Office: 614-578-1623
Email: atiba@orefc.com
Web: http://www.orefc.com
NMLS: 376247
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