Southern California’s housing market is not just hot right now, according to experts, across the U.S. this is “one of the hottest housing markets in US history.” The explanation isn’t hard to understand – we’re facing historically tight supply, met with unprecedented demand.
Low inventory = houses sell over asking price, spending little to no time on the market
During the height of the COVID-19 pandemic, the amount of available housing inventory plummeted as new building slowed, a foreclosure moratorium was instituted nationally, and potential sellers became wary of strangers wandering through their homes. The result was an alarming housing shortage that likely won’t be over for another 6 years or more.
As we emerge from the pandemic, the problem has yet to improve; in fact, it has actually gotten worse. In June of 2021, the national inventory of homes actively for sale had decreased 43.1% from June 2020. Simply put, houses for sale are scarce, and with so few to choose from, sellers have the power.
That’s why prices have been skyrocketing for the past year. Nationally, the price of existing-home sales rose 23.4% in June of 2021 from June of 2020, while almost 50% of homes sold for more than their list price. On top of that, properties only remained on the market for 17 days in June 2021, while an astonishing 89% of the homes which were sold had been on the market for less than a month.
Mortgage rates are historically low, increasing demand for houses
Mortgage interest rates have been at historic lows for most of the past year. At the end of July 2021, the average rate for a 30-year-fixed-rate loan was 2.78%, not far away from an all-time low of 2.65%. For comparison, it was nearly 5% at the end of 2018.
It’s simple: in real estate, things can change quickly. The housing market might look dramatically different a few months from now, as supply continues to increase, and rising mortgage rates push down demand. But for now, we’re still in a hot seller’s market.