An Unhealthy Housing Market?
Is there an unhealthy housing market brewing? The National Association of Realtors (NAR) reported March’s existing-home sales at 6.01 million. Comparisons to March 2020 may not be valid due to the start of Covid, but the year-over-year growth reflected an increase of 12.3%. This is unusually high and likely an outlier, but is consistent with the interest rate driven buying. Ongoing reports in April and beyond will also be comparing the current year to the pandemic year and are likely to show some initial large gains. The gains won’t be particularly meaningful as a measure of the health of the housing market. For example, the week of March 23, 2020 was the last week in 2020 to show positive year-over-year increases from 2019 until a combination of interest rates plummeting and better reports on Covid began appearing in July 2020. After July 2021, gains may reverse and show year over year declines which would reflect the inflated gains in the last 6 months of 2020 under rock bottom interest rates. As NAR reports:
The hot pricing in this housing market has more to do with the inventory crunch than record-breaking demand. Demand is nowhere near the level of demand in 2002-2005. In that period, demand drove prices. In the present market, lack of supply, materials price increases, low interest rates, and FOMO are driving prices higher. According to the current NAR data, the median sales price jumped 17.2% year over year. This is a combination for an unhealthy housing market which may likely cause regret with the buyers winning bidding wars.