The real estate market over the past five quarters has felt like a rollercoaster. From the tank in the market as the world responded to the beginning of the COVID-19 pandemic, to the sudden and drastic rebound as we found our footing as a society in response to the global emergency. But in the months following that rebound, the market hasn’t slowed down – why? Let’s take a look at the factors contributing to the hot housing market.
The response to COVID – A global health event meddles in virtually every market, causing a stir up in the way that most markets function. While many markets suffered in response to the COVID outbreak, real estate seemed to thrive. The primary cause behind this is what analysts have termed “urban flight”. As parallels between the prevalence of risk of exposure and population density began to be drawn, entire sections of populations from major cities all over the country began to flee to less dense, smaller cities and towns. This process has reduced housing stock in areas unprepared to compensate for sudden reduction. As is the general rule of markets everywhere, lower supply causes and induced demand. Sudden spikes in demand drives prices higher as scarcity continues to increase.
With Federal Reserve rates below 1%, and many major housing entities offering mortgage rates below 4%
Low interest rates – While a lot of factors in the current state of the housing market can be traced directly back to consumer behaviors to the pandemic, one of the most key factors was the response of major loan providers across the country. With Federal Reserve rates below 1%, and many major housing entities offering mortgage rates below 4%, it’s appealing to buy a home right now. Despite the rapidly-changing nature of the housing market, many experts are predicting that those interest rates are likely to remain similarly low for the foreseeable future. Keeping the rates of interest on home sales low makes the market more approachable to consumers, especially when there is good reason to leave metro areas in favor of more sparsely populated areas.
The need to find deals – With home prices on the rise thanks to a critically low housing stock, consumers are feeling the pressure to find the best deal. In a way, a hot market perpetuates itself. As prices rise, but the average amount of time a house spends on the market drops, consumers want to snatch up their new home as quickly as possible, adding a degree of fanaticism to the transaction. This allows for a collective rise in prices across the board. In April of 2021, median home price reached an all time high of $375,000. That price is over 17% higher than the same month last year. The need for potential buyers to find their perfect home at the perfect price is helping the market stay stoked.
Asset Based Lending (ABL) Helps You Leverage the Hot Real Estate Market
With the market hot, housing stock low, and millions of potential new homebuyers hitting the market through 2021, new home construction and drastic renovation projects by real estate investors will become increasingly critical in the coming months. Thankfully, a hot market makes the return on investment for real estate investors high. When you’re ready to take on your next building project, contact the experts at EMCAP Lending. Our dedicated team looks forward to helping you stoke the hot market’s flames with fast, easy asset based lending (ABL).