- DSNews - https://dsnews.com -

Housing Market Heats Up, Inventory Still Lags Behind

low income households

First American Financial Corporation has released its First American Real House Price Index [1] (RHPI) for May 2020. According to the report—which measures the price changes of single-family properties throughout the nation, adjusted for the impact of income and interest rate changes on consumer house-buying power over time at national, state, and metropolitan area levels—the gap in supply and demand that plagued the pre-pandemic home market has only grown.

What is even more newsworthy, experts expect that this imbalance between supply and demand will only grow, alongside increasing house prices. First American Chief Economist Mark Fleming suggests that—and at least through the summer season—home prices will remain robust.

According to the RHPI:

Fleming explained his reasoning behind this forecast: “Mortgage rates were falling before the pandemic, and just last week they fell below 3% for the first time ever. Demographic demand from millennials aging into their prime homeownership years continues to benefit housing as well. Both of these dynamics help boost demand.”

The resiliency of housing amid the devastation of other industries due to the outbreak of COVID-19 has been attributed by experts to a few key factors, including the presence of low mortgage rates and strong millennial demand.

“As the coronavirus pandemic continues to wreak havoc on global and domestic economies, housing has thus far proven resilient, managing a V-shaped recovery from the low point reached in April," Fleming said. "The strong rebound is largely a result of two dynamics that existed before the pandemic and have continued or even gained strength in the last few months.”

He continued: “Mortgage rates were falling before the pandemic, and just last week they fell below 3% for the first time ever. Demographic demand from millennials aging into their prime homeownership years continues to benefit housing as well. Both of these dynamics help boost demand.”

Yet another factor pointed out by Fleming was the increased demand in an already tight market. “An already tight inventory of homes has now reached record low levels and continues to move lower," he said. "The housing market amid the pandemic faces a significant supply and demand imbalance, and the result is accelerating price appreciation. In fact, based on current trends, we expect house price appreciation nationally to remain strong, and even accelerate in many markets this summer.”

The RHPI reports that the five states that experienced the greatest year-over-year increases were Vermont (+6.7%), Oklahoma (+3.7%), Montana (+3.5%), Texas (+3.2%), and Georgia (+2.8%). In addition, the five states with the greatest year-over-year decrease included Louisiana (-11.5%), New Hampshire (-9.5%), West Virginia (-9.3%), South Dakota (-7.7%), and New Jersey (-7.5%).