Despite Inventory Recovering, Home Prices Continue to Climb

Unlocking the Secrets Behind the Current Housing Market

If you’ve been in the housing market recently, you’ve probably noticed the scarcity of available homes for sale. The industry is slowly emerging from a period of unprecedented lean years, with both new and existing home inventory on the rise. However, a peculiar trend has emerged – the supply of newly built homes seems disproportionately high.

At Extreme Investor Network, we delve deeper into the numbers to uncover the hidden factors shaping today’s housing market dynamics. Our analysis reveals a complex interplay of historical events and economic forces that have culminated in this unique scenario.

The Unconventional Supply Scenario

According to the National Association of Home Builders (NAHB), there is currently a 4.4-month supply of new and existing homes for sale. Typically, a six-month supply is considered balanced between buyers and sellers. The pandemic-induced surge in demand led to a record low of two months’ supply at the start of 2021, triggering a price hike of over 40% from pre-pandemic levels.

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While supply is starting to rebound, the increase is primarily concentrated in the new home market. Surprisingly, there is now a nine-month supply of newly built homes for sale, nearly three times that of existing homes. This stark disparity underscores the need to analyze the market inventory holistically rather than in isolation.

Shedding Light on the Foundation of Today’s Housing Trends

The current housing landscape is a product of unique economic circumstances that have unfolded over the past two decades. The fallout from the subprime mortgage boom in 2005 triggered a severe foreclosure crisis and plunged the economy into the Great Recession. Single-family housing starts plummeted, and new homes accounted for just 6% of the total supply by 2012.

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Fast forward to the COVID-19 pandemic, which sparked a surge in consumer demand and record-low mortgage rates. Builders ramped up production, resulting in a spike in housing starts. However, the roller-coaster ride of mortgage rates, coupled with the lock-in effect from refinancing at historic lows, significantly impacted the supply chain.

Navigating Mortgage Rate Mayhem and Supply Imbalances

The peculiar divide between new and existing home supply can be attributed to fluctuating mortgage rates and evolving consumer behavior. Millions of borrowers locked in low rates, hindering new listings and empowering builders to control the market. As resale listings witnessed a modest uptick, the supply-demand imbalance persisted, fueling price hikes in certain markets.

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At Extreme Investor Network, we are committed to providing in-depth analysis and actionable insights to help you navigate the complexities of the housing market. Stay informed with our expert commentary and stay ahead of the curve in your investment decisions.

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