Coping With The Crazy Housing Market
Welcome to Saving Money with Andrew!
If you’ve bought or sold a house recently, or if you just have friends or family doing so, you’ve likely heard how crazy things are out there. The most recent National Association of Realtors update tells the broad story:
After a brief lull in Spring 2020, existing home sales are at record levels (both activity and pricing), with prices up over 17% in the past year to a median price of $329,100, and far higher on the coasts or near major cities.
The average house is on the market for only 18 days, down from 29 days a year ago. In particularly hot markets, the average house is on the market for less than a week.
Housing inventory is at very low levels (in fact, inventory appears to be at or near a 20 year low).
For those trying to buy a house right now, it is probably a very frustrating process. But here are a few reasons to feel a bit better about how crazy things are:
It Might Get Better - For a large portion of last year, existing home sales fell off a cliff (see page 2). The people who wanted to move then, and the people who want to move now, are currently chasing the same low supply of available homes (see page 8). But over time, the number of buyers should normalize at typical levels as those who deferred moves during COVID finally complete their moves.
Housing Supply Is Growing (slowly) - Housing inventory is very thin, and homebuilders are responding by rapidly building new homes, with housing starts reaching levels not seen since the mid-2000’s construction boom.
Interest Rates Are Still Low - Mortgage rates are still very low, a trend I first discussed last year. Despite home prices reaching ever-higher levels, lower interest rates have generally meant that the median monthly mortgage payment, adjusted for inflation, is actually lower than it has been at most points since 1989 (as this interesting post discusses).
It can be extremely frustrating to watch as home prices spike in many markets. But in times like these, it’s even more important to stay disciplined and not get caught up in the frenzy. As the computer said in the 1983 Matthew Broderick classic WarGames…“[Sometimes] the only winning move is not to play”.
If you have any interesting stories from your local housing market, I’d love to hear from you!
And now…Andrew’s pick(s) of the week:
I was floored by this recent segment of This American Life, telling the story of a focus group of regular Americans discussing the COVID vaccine. Rather than say more, I urge you to listen to the whole thing. It’s great.
I hope this has been helpful. If you liked it, please share it on social media! Also, please send me your feedback, requests, and success stories.