(Akiit.com) The residential housing market is experiencing massive growth right now. According to some commentators it has never been busier. Buyers are looking for properties all over the country, and that’s pushing up the price to levels never seen before.
But what’s weird about this current boom is that it looks nothing like the last one. Back in 2005, buyers were living in their properties for about a year with no down payments and then flipping them to the next buyer so that they could move into a larger abode. Although few people saw it at the time, it was clearly a house of cards – if you’ll excuse the pun.
But this year, things are different. Lending standards are much higher, buyers are putting down deposits, and buyers aren’t flipping as they did in the past. Instead, something else is going on.
If you take a look at sites like Camijoneshomes.com, you can see the state of the market for yourself. It’s looking healthy, but prices are also going up.
The question for us is what’s driving this. Well, it’s certainly not lower barriers to entry. Ever since the financial crisis, banks have become far more stringent in their lending, only providing mortgages to people who can afford them. Subprime is much smaller than it was fifteen years ago.
Cheap Credit
Well if there’s one thing the pandemic gave us – apart from the fright of our lives – it was more cheap credit. Remember back in 2017 and 2018, the Fed talked endlessly about tightening credit and returning the economy to normality. Well, right now, that looks like it’s out of the question. Cheap credit is here to stay, and we’re likely going to see massive asset price inflation over the coming years.
Migration
Then there’s the matter of migration. When the pandemic hit, people adjusted their lifestyles almost overnight. We soon learned that a large percentage of people were living in cities, not because they want to, but because they have to be there for work. When the work went remote, the need to be in a certain location virtually disappeared.
Real estate agencies operating in regional cities say that they are seeing a huge increase in interest in local properties. Buyers are looking to slash their costs of living by moving to less expensive locations. That way, they hope, they will have more money for other things in life, aside from their homes.
Lack Of New Home Supply
During the pandemic, new home supply cratered. Building companies simply weren’t able to operate under the conditions that prevailed throughout most of last year. So new construction projects are far behind where they would have been, had the pandemic never happened.
The biggest winners from this process are people who already owned their homes. They’ve seen COVID-19 push up the asking price of all properties across the nation by around $1.5 trillion – a direct transfer to the property-owning class, according to www.wsj.com. Property also began outperforming the S&P, causing investors to move away from stocks, leading to even higher prices.
Staff Writer; William Carter