We have the data to explain why this market has been so "weird" lately.
Have you ever wondered what the housing market is like these days? It’s a question that’s been on many minds, and my recent encounters with it have led me to describe it simply as “weird.” Let me share a compelling story and graph that highlights what’s happening.
This graph compares existing home sales with new construction, revealing a significant divide since the rise in interest rates. This divergence is particularly noteworthy, and here’s why.
For those comfortably settled in existing homes with low mortgage rates, the incentive to sell and move into a higher-interest-rate market is minimal. Consequently, many homeowners are opting to stay put, a trend I’ve observed frequently.
However, this doesn’t mean the demand for housing has diminished. In fact, nearly three-quarters of a million new homes are expected to be constructed this year alone, yet this supply is struggling to keep pace with demand. The result? A persistent gap that is driving housing prices higher and higher.
While interest rates may eventually narrow this gap, currently, they continue to contribute to this intriguing trend, creating challenges for prospective homebuyers. This situation is especially challenging for the 50% of buyers entering the market for the first time, a number that has risen from 37% before the interest rate uptick.
What does this mean for housing prices in the foreseeable future? Simply put, if demand surpasses the available supply, brace yourself for consistently robust prices. Although it’s likely that decreasing interest rates will eventually influence this dynamic, for now, the trend remains intriguing and poses challenges for those looking to buy. If you’re interested in delving deeper into this topic or seeking more information, feel free to reach out by phone or email. Let’s navigate this unique housing landscape together.