The Housing Market: No Crash In Sight
Certain frightening words and images have made their way into the pop culture lexicon, and the sound or sight of them creates an instant case of the shivers. I’ve never seen the movie IT, but the sight of a red balloon still freaks me out. For the hyenas in The Lion King, the word was Mufasa. For homeowners and real estate agents, the word is probably crash.
Anyone who participated in the housing market a few years prior and leading up to the crash of 2008 remembers the brutal fallout for homeowners; the resulting cautiousness of the current generation is not without reason. Despite our collective, long-term whiplash, there are indicators–demand, supply, and a year at home–that support a continued, steady rise in the housing market.
In terms of demand, three or four benchmarks are signaling a continued rise. The first of these has to do with Millennials. (Of course it does, say the Boomers with a collective eye-roll.) Millennials are the biggest generation in American history that has been too financially constricted to purchase a home—until now. As Millennials grow into their occupations, they have been storming into the housing market, which impacts the available homes in demand. Additionally after a year at home, homebuyers (Millennials included) have been using their down time to save money. National savings rates are at the highest levels they’ve been in decades. Pair healthy savings accounts with record breaking mortgage interest rates and a generation eager to enter the housing market, and you have a recipe for even higher demands.
The supply side of the market also has a generation to look to for answers. In previous decades, seniors (In this case, Boomers. Aaaaand…cue Millennial eye roll.) have sold their homes to downsize. Instead, seniors are choosing to age in their homes. The new age-at-home trend is keeping millions of homes off the market. The combination of limited older homes available and years of insufficient building rates have led to a serious lack of supply. Add to this increased lumber and building material costs, and builders are prevented from adding to the supply inventory at the rate they would like.
With high demand and low supply in any typical year, the market is on the rise. Throw in a global pandemic, and the housing market is changed in a way we’ve not witnessed in the past. Younger generations are coming out of the pandemic with cabin fever. Their tiny apartments have seen better days, and they are ready for more space. Older generations and generations with higher incomes are coming out of the pandemic with new “work from anywhere” positions and are looking for new spaces to make the most of their office/home life combination. Low supply, high demand, new parameters for home/life balance…until the home supply starts to meet the demands of the changing world, the market will continue to rise and, at least for the next year or so, we’ll avoid the scary “C” word.