Business Telegraph

The Entrepreneurs

Is the Housing Market in a New Upward Trend?

  • Written by NewsServices.com

The housing market in the United States has been on fire, with prices and sales surging due to low mortgage rates and scares existing homes. Material prices used to build homes, such as copper and wood, have rallied sharply as the demand for homes increases. Higher material costs have made it difficult to build new homes. During the pandemic, which started in the United States in March of 2020, a shift in home demand generated a surge in need for homes outside cities. As people migrated out of the cities into the suburbs and rural areas, they scooped up houses as they left apartment dwellings. Before the pandemic, the housing market was tight as robust economic growth, a strong job market, and low interest rates made housing affordable. While sales have started to decline due to the lack of inventory, prices continue to rise. This scenario could increase new homes built as construction ramps up to fill the void created by the strong demand for housing.



New Home Sales Dip as Materials Remain Scarce

One of the issues facing the housing market in the U.S. is that material prices impact builder's ability to make more affordable homes. According to the U.S. Commerce Department, New home sales fell in April by nearly 6%. The Commerce Department also revised the March figure for new home sales down to 917,000. Despite the downward revision, recent home sales were still shown to be up 48%.

The decline in new home sales in April was broad-based. Sales rates decreased in nearly every part of the United States. However, the largest sales decline occurred in the Northeast, with a nearly 14% drop. One of the biggest issues is that the inventory of new homes for sale at the end of April was March. It equated to a 3.8-month supply, down from a 4.6-month supply the month before.

Existing Home Sales Drop

Existing home sales matched the drop in new home sales. According to the National Association of Realtors, sales of existing homes dropped 2.7% in April to a rate of 5.85 million units. It was the third straight month of declines. Sales were 33.9% higher than April 2020, but that comparison was skewed because there was little activity in April 2020 due to the pandemic. The inventory of existing homes for sale at the end of April was down 20%. There were 1.16 million homes for sale, representing a 2.4-month supply at the current sales pace. The combination of low inventories and low mortgage rates help buoy the median price of an existing home to $341,600 in April, increasing 19.1% from April 2020. That is the highest median price on record. Robust demand was reflected by all-cash share of sales which rose to 25% from 13% one year ago.

Mortgage Rates Drove Deals

One of the critical drivers of the price of homes is low mortgage rates. As the pandemic took hold in 2020, the Federal Reserve cut interest rates to zero and initiated a bond purchase program of 120-billion in Treasury securities per month. This process has weighed on mortgage rates making purchasing a home with a mortgage desirable. The affordability of homes with ultra-low mortgage rates has increased competition for homes driving home prices higher. However, much of that large increase in the median price is due to the mix of selling homes. There is far more activity on the higher end of the market, where supply is plentiful, and very little activity on the low end, where the shortage is most severe.

Material Prices Surge

The higher cost of materials such as copper and lumber has reduced the margins builders can make. Builders have not been increasing production as they are hampered by rising costs for land and material and employees. The cost of labor has also increased in the wake of the pandemic as low rates drive growth and reduce the number of available construction workers. For example, copper prices have increased 75% year over year. Copper is used for piping as well as an electrical conductor. Lumber prices are down 40% since hitting a high in May. Despite the recent drop, prices are up more than 250% year over year.

The Bottom Line

The housing market is in a secular uptrend in the U.S. and is likely to continue as people move away from cities in the wake of the pandemic. In the U.S., the bull market in share trading is expected to continue along with the housing market until the Federal Reserve begins to unwind its bond purchase program and signals to the market that interest rates might begin to rise. Low mortgage rates will likely continue to trend higher but still remain attractive. On the other hand, suppose the Federal Reserve continues to let inflation run hotter than normal. In that case, there is likely to be a further reduction in home sales as housing prices move higher, reflecting higher building costs and low inventories.

Entrepreneurs & Leaders

How a day at the races can help you win clients

In today’s modern digital age, some may think that the days of wining and dining your clients are long past. In real...

14 Best Indoor Plants for Australian Homes

Your home is your sanctuary and adding plants can make it that much better. What you will need are plants that thriv...

Full Guide to No Deposit Free Spins

Free spins are bonuses given to spin the reel for free a certain number of times in different types of slots. Usuall...

Stripe Payment Methods: Top Payment Methods Supported By Stripe

Founded in 2009, Stripe is a fully-fledged payment method with impressive global coverage. It is a payment gateway...

IPE Decking

With an increasingly green society, it makes sense to make your deck choices environmentally friendly. Choosing IPE ...

Tips to Choose the Right Digital Agency for Your Business

Nowadays, a growing number of businesses have come to a point where they have to outsource digital marketing service...

Ways to Improve Your Local Marketing Strategy

Your local business is struggling. New customers are hard to come by. You’ve tried marketing, but it just doesn’t se...

How one can have a great reputation on Instagram

If you want to get Instagram followers, you are supposed to get yourself a great reputation here on this platform. S...

The Right SEO Agency Can Make All the Difference

There is a lot that goes into successfully marketing a business online. We all tend to put a general importance on t...

How to pick an engagement ring

How to Pick the Perfect Engagement Ring - Peter Franklin How to Pick an Engagement Ring — Borsheims Is i...

Nose news: 7 potential benefits of rhinoplasty

Rhinoplasty, or a nose job, is a cosmetic procedure designed to modify the nose’s appearance. These procedures can b...

Corporate Calendar - 5 Best Practices for Keeping Your Work Calendar Organized

Do you need to get those all-important corporate gifts and promotional products out on time for every marketing camp...

What can I purchase with a Low Doc Business Loan?

As a business owner or self-employed individual, approaching a traditional bank or lender for finance can be complic...

Buying Facebook Likes

Facebook is among the social networking platforms you should undoubtedly use If you'd like to generate some buzz or ga...

Betting Sites that Use Cryptocurrency

Crypto Sports Betting Sites When talking about crypto, the first currency that comes to mind is Bitcoin. A sport be...

Online Gambling Statistics in Australia

Aussies are among the world's most prominent gamblers, whether they're playing slots at a traditional casino or the ...

Why DIY Plumbing Will Do More Damage Than Good

When you’re having plumbing issues, it can be quite tempting to fix these yourself. Some plumbing issues look like e...

Understand More About Vehicle Detection Sensors

Within any traffic setup system, vehicle detection is an appropriate vehicle detection procedure. Vehicle detection ...

Top Three Benefits of Social Media Marketing for Businesses

While social media has made marketing so much easier, entrepreneurs should use social media creatively and strategic...

COVID Impacted Australian Businesses Find Alternative Revenue Through Print-on-Demand

Australian businesses with COVID impacted staff are struggling to find alternative revenue streams. One way they hav...

Enhance the Aesthetic Appeal of Your House by Design the Best Home Garden

The house I live in now oozes exclusive charm and elegance of its own, with its exquisite architectural design from ...

Is the Housing Market in a New Upward Trend?

The housing market in the United States has been on fire, with prices and sales surging due to low mortgage rates and ...

How do I get my stubborn dog to listen?

Dog experts are accustomed to hearing complaints from frustrated dog owners. Some of the things that they commonly h...

Launching a Startup Real Estate Business? Ideas to Learn from Display Homes

Investing in real estate is considered lucrative and draws many investors from far and wide. This isn't all rosy, as m...

Writers Wanted


NewsServices.com

Content & Technology Connecting Global Audiences

More Information - Less Opinion