Momentum Building on the Economic RecoveryMay 13, 2021 | By Dara Giddings
If you have been in the housing market for the past few months, or if you are even in a neighborhood social media group, you have probably encountered the struggle of houses moving on and off the market very quickly. Stories of houses being bought sight unseen because buyers have missed opportunities or had offers rejected. Everyone in my circle is concerned about the real estate market and I believe that there is a general belief that as the economy goes, so goes the real estate market. However, that is not what happened last spring when the pandemic hit. Everyone anticipated that the real estate market would falter, but the market paid little attention to the overall economy as the housing market went on a tear.
While it is my belief that the real estate market cannot continue to grow at the current rate, my “guess” is that it will come back to earth via a “soft” landing, especially if the economy grows as this article from FloridaRealtors.org suggests that it could. A strong economy could, however, encourage a prolonged Seller’s Market like the one we’ve been experiencing. A seller’s market happens when the number of buyers exceeds the number of homes for sale. This means that buyers have fewer homes to choose from, which in turn leads to less competition amongst sellers. These market conditions may inspire bidding wars amongst buyers, driving up the sale price and giving the seller more negotiating power.
But within the broad economy, we are also seeing the recovery picking up momentum. As vaccination totals increase, more businesses are re-opening, and things are looking up across the board. With increased vaccination rates, many office jobs are requesting their employees return to the office, this then increases the business at lunch counters, fast food locations, and other convenience businesses. According to FloridaRealtors.org, “The bounce-back has been swift. In March, employers added 916,000 jobs – the biggest burst of hiring since August. Meantime, retail spending has surged, manufacturing output is up and consumer confidence has reached its highest point since the pandemic began.”
The U.S. housing market is 3.8 million single-family homes short of what is needed to meet the country’s housing demand, up 52% as compared with 2018’s shortfall, according to a new analysis from mortgage-finance company Freddie Mac. In 2018, Freddie Mac had estimated that the housing market was 2.5 million units short of what it needed to meet long-term demand. The new estimate is as of the end of 2020 and it emphasizes the severity of the housing supply. While there is no guarantee how long this current seller’s market can last, experts don’t see a dramatic shift until new construction can increase the listing inventory.