(Oct. 30, 2020) With two months left in this bizarre 2020, and the continuation of a very strong sellers market, many buyers are asking what impact continued economic uncertainty could have on home prices and will they finally start to level or go down.
It seems that supply and demand is the driver right now, and it is further fueled by the continued historically low interest rates.
Supply and demand economics simplified is when there is a high demand for an item and a low supply of it, consumers are willing to pay more.
Due to the undersupply of homes on the market today, there’s upward pressure on home prices. And, this housing supply shortage is resulting in bidding wars in our resort area, which also tend to drive final closed prices higher.
This concept is also affecting lumber prices and other construction materials with new construction on the rise.
Experts are projecting price appreciation will continue over the next 12 months.
For example, forecasts over the next 12 months from some of the top home industry experts are: 7 percent increase-Zillow; 5.9 percent increase-Zelman; 5.5 percent increase-Freddie Mac; and 4.3 percent increase-National Association of Realtors.
This past week also marked the 13th consecutive week of interest rates below 3 percent, with the average U.S. mortgage rate for a 30-year fixed loan falling to 2.8 percent, another record low reported by Freddie Mac.
The average fixed rate for a 15-year mortgage was 2.33 percent, falling from the prior week’s 2.35 percent.
“Mortgage rates remain very low, providing homeowners who have not already taken advantage of this environment ample opportunity to do so,” said Sam Khater, Freddie Mac’s chief economist. “Mortgage rates today are on average more than a full percentage point lower than rates over the last five years.”
Initially in the early part of 2020, many predicted that home prices would depreciate this year due to the economic slowdown from the coronavirus.
Instead, home values have been on the rise and sales have been very strong. And, with new listings being outpaced by homes going under contract consistently since mid-April, it is very likely we will see home values continue to rise in 2021.
— Lauren Bunting is an Associate Broker with Atlantic Shores Sotheby’s International Realty in Ocean City.