If there’s one thing the COVID-19 pandemic has largely affected, it is the booming real estate market. With mortgage agencies offering lower interest rates, more people are competing to buy available homes amid a housing inventory crisis. Thus, it’s not surprising to see house prices surging with numbers climbing at their fastest rate.
While it’s been a roller coaster ride for agents and real estate companies, homebuyers have had enough with the housing boom. As prices climb and inventories reach record lows, homebuyers are no longer biting deals. Finding homes in a hot housing market can be productive, but taking too long to find homes can drive buyers to feel worn out and hopeless more than ever.
As buyers are taking a backseat from real estate, experts are seeing signs of a slowdown of the housing market—even just a little. Since the first half of 2021, price growth is falling and fewer buyers are applying for loans to purchase properties. For this reason, prospective buyers are plagued with the question if the housing crisis is finally coming to its end. In this article, we’ll discuss the status of the housing market and what it means for buyers and real estate companies.
The current state of the housing market
Since the pandemic, it seemed that there were no signs of slowing down for the hot housing market, but experts say that it’s finally losing its frenzy. In the past weeks, price growth is slowing and applications for home loans are falling. While competition still exists, it’s not as fierce as it previously was.
After hitting the apex for many months, the housing market is beginning to reveal cracks and it’s slowly topping out, but this doesn’t mean that prices will start to fall for real estate. In fact, median housing list prices are still beyond 12% than the previous years.
There are plenty of factors that contribute to the gradual slowdown of the housing market—the nationwide property shortage, skyrocketing prices, the fear of another housing bubble, and the easing of pandemic restrictions. All these factors have dampened the severe demand in the past year. If this goes on, this will lead to lesser bidding wars, more offers beyond the seller’s asking price, and a welcome opportunity for weary homebuyers.
It’s understandable why buyers are stepping back from the hot housing market. They had enough of the rising prices and the idea of not getting the houses they wanted. Although COVID-19 has played a role in the sudden flux on last year’s market, it may also be a sign of an overall softening.
Why housing prices aren’t falling anytime soon
Here’s a fact. Nationwide house prices aren’t going to fall anytime soon. Experts are predicting that it’s likely to keep rising, but they’re also seeing that price growth rates will slightly decelerate by going as far as single digits.
According to the principles of housing gravity, prices shouldn’t reach double digits. The market has gone beyond its limits and prices have to moderate at some point to support its buyers. Still, it’s impossible for housing prices to fall because of the law of supply and demand.
Although people have places to live, some are still looking for homes that will accommodate their growing needs. Builders are also not keeping up to create new properties as their activities remained restrained by zoning laws, rising prices of materials, labor shortages, and delivery delays.
According to experts, prices are likely to pick up again in the next few months. Although buyers won’t get enough interesting deals, they will still compete with lesser offers while sellers will keep the prices high. They have witnessed trends on how other sellers have sold homes for competitive prices, and they will likely do the same if they know that their house has a lot to offer.
The chances of a cooling housing market
With the pandemic slowly easing in some areas, this will lead to some changes in the housing demand. More people may be reluctant to move out since in-person activities are gradually resuming and physical establishments (e.g. offices, gyms, and schools) are reopening. For these reasons, people will no longer require so much space in their homes now that they can return to the outdoors again.
A minor slowdown in the housing market offers a great opportunity for low-income buyers but there’s no certainty for it. It will take years before the housing inventory keeps up with the crazy sellers’ market caused by the pandemic. Although we’re seeing signs of softening, remember that conditions may reverse quickly. So keep your options open and don’t commit to something you’re not yet ready for.