For the past decade, the United States economy has continued to recover from the Great Recession that affected all people. While the stock market has continued to climb, another leading indicator that the country is doing better financially is the strong housing market. In fact, a recent report has shown that the housing market could have had its most significant growth month in a long time.
At the start of 2020, the housing sales across the United States rose nearly 8% to an annualized level of 764,000 units. This was a significant increase compared to the prior year and higher than already aggressive projections. At the same time, the median price for the sale of a single family home rose to about $350,000. This an impressive 15% increase compared to the prior year, which is an indication that more people are buying larger and more expensive homes.
There are several reasons why economists believe that the home sales have increased. One of the most significant reasons is the reduced borrowing costs. Over the past six months, mortgage interest rates have declined with rates on new 30-year mortgages available for as low as 3.50%. These rates are among the lowest of all time and can drastically reduce the monthly payment and improve affordability.
Another factor helping the market has been the strong job and stock market. With stock reaching all-time highs in January and February 2020, more people had access to more money than ever before. This allowed people to put more money down and purchase a property.
Finally, the warm weather across the country has also helped. While warm weather causes other concerns, it does help people to get out of their homes during the colder months of the year. This also leads to more people looking for properties. This year, the warmer January weather was well-correlated with the higher level of sales volume that is normally reserved for March and April when it is normally getting warmer outside.
While it is good to see housing values and sales increase, it has also led to some concerns over the possible development of another bubble. The last time there was this much sales velocity and value growth was in July 2007. At this time, housing prices had basically peaked and soon declined rapidly. This led to a lot of foreclosures and many other economic issues for those all over the world.
Dil Bole Oberoi
