This month, we examine how the housing undersupply is increasing home prices and paving the way toward a more balanced market. We also discuss the sharp decrease in mortgage rates and the state of employment, which is historically one of the leading indicators of home valuations.
Currently, the housing supply is so low that demand far outpaces the number of homes on the market. Freddie Mac estimates that the United States is about 4 million homes short of meeting buyer demand. The housing shortage compounds when potential home sellers decide to stay out of the market because they feel they won’t be able to find a home to buy after they sell. Home builders, who have been slow to ramp up production after the 2008 crash, are drastically increasing new construction because they want to capitalize on the sustained demand for housing.
We expect relative housing demand to remain high over the next 12 months at the very least. New homes take time to build and will not come to market at the rate necessary to balance it. In March 2021, U.S. home builders started constructing homes at a seasonally adjusted annual rate of 1.74 million, up 37% compared to March 2020. New construction will eventually alleviate some of the shortage, but housing will remain undersupplied for months, if not years, to come.
As we navigate this period of high buyer demand and low supply, we remain committed to providing you with the most current market information so you feel supported and informed in your buying and selling decisions.
In this month’s newsletter, we cover the following:
- Key Topics and Trends in May: Low home supply will continue for the foreseeable future, increasing bidding wars and driving up prices. The average U.S. mortgage rate decreased 23 basis points in two weeks.
- May Housing Market Updates for Silicon Valley: Single-family homes are massively undersupplied relative to demand, causing prices to appreciate further. Condo prices remain stable and near all-time highs.