WHY IS THE MARKET THE WAY IT IS

  • Franco Saladino
  • 03/29/22

WHY IS THE MARKET THE WAY IT IS???

By now you have realized the housing market is out of control.  The housing supply is at record lows, demand is at records highs and housing value is gaining double digit appreciation.

3 Reasons Why this is happening?

#1  Covid 19.  It goes deeper then it is at face value.  At the onset of the pandemic, mills shut down, supply chain shortages caused new builds to greatly slow.  This also caused material prices to increase pushing new builds prices higher as well as stalling production. 

My initial thinking as to why inventory was/is so low was that people were afraid to list their homes in fear of the virus.  I did a little research and found I was WRONG.  Before the pandemic Montgomery County MD for example sold   12,719 units sold.  A year later, at the onset of the pandemic we sold 13,495 units.  What blows my mind in 2021, full pandemic mode, we jumped to 15,672 homes sold.  SO its not that people were afraid to sell their homes. 

#2 Interest rates have been falling for the last few years.  The fed has pumped money into the economy and cut the rate.  We have seen interest rates dip below 3% which is phenomenal.  Many people have refinanced, but as a result of these actions, buyers have flooded the marketplace. 

#3 Baby Boomers and Millennials

Baby boomers are the second largest population group in the US second to Millennials.  They were born between 1946-1964.  They total 70 million here in the USA.  They have been notoriously financially influential throughout their lifetime.  The truth is they continue to impact the economy greatly.  Baby boomers have aged in place, they are working longer, living longer and are making accommodations such as first floor masters, installing elevators but they are not downsizing.  They are not selling! They are greatly contributing to our complete lack of inventory.

Millennials are now the largest population group in the US.  Totaling around 73 million people.  They are causing a different problem.  They are born between 1981-1996.  They are now in the prime age for home buying.  48% of older millennials and 82% of younger millennials have purchased in the last 3 years. They have flooded the housing market in droves and combined with other buyers seeking the low interest rates, out market is beyond saturated with buyers.

To put it simply, why is the market the way it is?

#1 The effects of Covid, supply chain issues etc.   #2 plummeting interest rates      #3 Baby boomers the second largest population group in the USA not selling or downsizing and Millennials the #1 population group in the US, now in the prime home buying age. 

Now you know!

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