US home prices increased 24% year-over-year in May, the highest increase in more than 20 years. The market is in a frenzy, with some home buyers bidding six figures over asking prices and sellers selling many homes within a week of their hitting the market.
What’s really going on?
It’s not like the last housing bubble, where buyers with poor credit bluffed their way into mortgages, artificially inflating demand. Pundits have noted supply factors including home building that slowed down during the pandemic recession and lumber prices that are sky-high, inhibiting building. This article also cites the millennials who are now entering their prime home-buying ages. And interest rates remain low, which makes the average buyer able to afford mortgage payments on a more expensive house.
I think people are just stir-crazy
Obviously, a lot of consumers suffered hardship during this recession, and a lot lost their jobs. But a lot of others kept getting paid, saved money they would otherwise have spent on expensive goods or vacations, and are now walking around with a nice juicy down payment.
I also think an emotional factor is driving people into the market.
People who spent the the last year cooped up in their houses staring at the walls and dealing with their children as they worked remotely are just in desperate need of a change in scenery. Those that can afford it are looking.
Renters are ready to finally buy that starter home and get out from under the landlord’s stinky apartment.
People with growing families are sick of being cooped up and want more space.
People in parts of the country where homes are expensive are realizing they can cash out of their houses, move to somewhere cheaper, and do the same work remotely.
And older folks with nests emptying are ready to harvest that swelling home value and live somewhere smaller and cheaper.
The pandemic didn’t create all these trends, but it sure helped amp up the anxiety of people with their situations at home, where they spent nearly all of their time for the last year. They’re just sick of their houses. They’re sick of the color of the walls, they’re sick of the things that need repairs, and they’re sick of the smell.
A lot more people are ready to make a change.
I have no concrete evidence for my hypothesis. So I’m turning to you. Are you sick of staring at your home office? Are you itching to make a change?
Or are you too terrified of what’s going on in the housing market to even go near it?