The Covid era has been even better for the housing market than it’s been for Peloton instructors’ Instagram followings.
- When quarantines forced us to jury-rig encyclopedia standing desks, we had to spend more quality time with the weird beige paint in the living room…and started shopping for new homes.
- Record-low mortgage rates, spurred by the Fed’s moves to lower borrowing costs across the economy, have also helped strike up demand for housing.
New data out this week showed the housing market stayed strong throughout the summer. In August, U.S. new-home sales increased at the fastest rate since 2006, the government reported yesterday, marking four straight months of growth.
Only problem? We’re running out of homes to sell
At the current pace of sales, it would only take 3.3 months to run out of inventory. The supply/demand mismatch is pushing prices skyward, especially since sellers aren’t exactly rushing to host open houses these days.
- The supply squeeze has bolstered the home construction industry in a big way. Single-family housing starts for August reached the highest annual rate since February.
Actually, there’s one more (major) problem
With the economy still in the basement, people are straining to pay their mortgages. According to industry analyst Keith Jurow, “several million” people will have gone nine months without making a payment when the Federal Housing Finance Agency’s foreclosure and eviction moratorium expires at the end of the year.
- 17% of FHA-insured mortgages were delinquent in July, per the Department of Housing and Urban Development. In NYC, 27.2% of mortgages were.
Bottom line: The housing market is one of the few sectors to experience a true V-shaped recovery following the initial hit from the pandemic. But without enough houses for sale, the newfound demand is driving what some experts are calling an affordability crisis, in which higher home prices strip away the benefit from lower interest rates.
Via Morning Brew