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Thursday, July 8, 2021
Why Is the Market White Hot? No, It’s Not (Just) the Pandemic
The groundwork for today’s inventory shortage was created during the 2008-2009 Great Recession. The pandemic merely made existing problems worse.
NEW YORK – Today’s market problems – a shortage of affordable housing, historically tight inventory of homes for sale, and rising prices – weren’t caused by the latest pandemic-caused economic slowdown. It goes back to the Great Recession.
Experts say the U.S. housing market was already being roiled by forces fueling the current housing-price explosion even before the pandemic.
Matthew Murphy at New York University’s Furman Center for Real Estate & Urban Policy said supply shortages were evident heading into the pandemic, adding that “the context here to this current housing moment is that we were still recovering from the 2008-2009 foreclosure crisis.”
Meanwhile, the National Association of Realtors® has been pointing to an “underbuilding gap” of between 5.5 and 6.8 million housing units since 2001.
According to the National Association of Home Builders, none of the new single-family homes built across the United States in 2020 were priced under $100,000, while just 1% fell in the range of $100,000 to $150,000 – yet demand for single-family homes soared during the pandemic, and monetary policy accommodated this frenzy. The result has been a shrinking base of available homes for aspiring buyers.
The pandemic added to the existing problem. Experts say, for example, that more older Americans have been hesitant to let people into their homes or visit open houses because of COVID-19.
“You project out a year or two, and when rates have gone up, borrowers are going to look at increased prices and a new loan on a purchase and realize that staying in their own home is cheaper on a month-to-month basis,” says Todd Teta at ATTOM Data Solutions.