For many years, the housing supply had been low due to the high mortgage rate, high property prices, and other factors such as low construction rate and government policies, among others. According to a response to Realtor.com data, the supply of homes has finally started to improve as the month-to-month mortgage cost on a $400,000 residence, with a 20% down cost, which is now greater than it was in March 2020, according to a response to Realtor.com data.
For the past two years, there has been an imbalance between the supply and demand sides, mainly due to the Covid-19 pandemic. During the first pandemic wave, many people lost their employment which effectively meant that their affordability was deeply compromised. During this time, many people started counting on the government to support their living, and many others relied on their long-term savings. In such conditions, home buying ability was largely affected!
Entering 2022, the economic condition of most people began improving, especially in the months immediately after the vaccination had been rolled out. During this time, many people began resuming work, and to date, there seems to be a state of normalcy. In fact, many areas are recording high employment stats, which means many people who were locked out of the market during the pandemic years will be making a comeback.
And it makes sense! During the pandemic years, many homebuyers were priced out of the market. Prices rose so fast that many low-to-moderate income people could hardly keep up. The rates are rising, which means many people are getting out of the market. Sellers are scared and are releasing their homes for sale to capture the high prices before the market normalizes. We all knew that it was just a matter of time for the market to stabilize; after all, when there is a high swing, it is likely that there will be a corrective measure. While this corrective measure might not be significant enough to favor many buyers, it at least gives the market a breathing space.
“April data suggests a positive turn of events is on the horizon for weary buyers: If the trends we’re seeing now hold true, we could potentially see year-over-year inventory growth within the next few weeks,” said Danielle Hale, chief economist for Realtor.com.
High mortgages in the market have decreased homeownership demand, and house supply which was an issue in the past years, has now started to improve.
Housing demand in the market is influenced by the size, quality of neighborhood amenities, location, and distance from the city center. People willing to buy a home and afford it at a high price have occupied the classic city model housing. Large house loan prices with higher housing rates have side-lined with the level of competition, and this has improved house supply.
During the pandemic years, one trend was prevalent. People preferred less expensive properties, and since many were already working remotely, they migrated to other areas where houses were cheaper. Now that the pandemic is manageable, many people have resumed their old position or found new positions, which means they can confidently afford the new cheaper home. In areas where they migrated, the housing situation is getting better with supply rising, but this is not sustainable. Sustainable supply is where we have new construction happening and adding more properties to the market.
When house demand is high, property prices also increase, and home sellers will try to improve on supply to grasp the high profit made from home selling. In April, the stock was 12% lessen than in the same month last year. In the seven final days in April, exhibits stock was down only about 3% from 12 months in the past.
This is the right time for these buyers who wish to get home and market it in the future with unprecedented price growth. This is because the high supply that is present now will not be sustained for long due to the high demand that is competing with the improving supply. When one buys a house now and markets it in a few months to come, the house price will rise, thus making more profit.
In April this year, house loans rose to their highest level since June 2009, and today’s mortgage rate is 5.33%, while the average rate for 15 years fixed rate is 4.406%, forcing home buyers to leave the market. As a result, the home supply is improved but will not be sustained for a long period as investors look for alternative means to get back to the market.