As we enter the second half of 2021 and work our way through the challenges that have been brought on by the ongoing global COVID-19 pandemic, many are wondering how home prices will be affected by the global economic slowdown.
As it’s always been the case, demand and supply provide us the clearest idea of how the pandemic will impact the real estate market, and what we can expect in the foreseeable future.
It’s Always Been about Demand and Supply
As we approach the middle of summer, there’s currently an undersupply of homes in the U.S market. However, it’s worth noting that this undersupply will vary based on price point and location. But to give you a general idea, we have a 4.1 months’ supply of homes on the market across the country – according to the National Association of Realtors (NAR).
To give you some perspective, a 6 month supply of homes has historically been considered a market that’s balanced. If there’s more than a 6 months’ supply, it’s considered a buyer’s market, which means the prices will depreciate. If it’s below 6 months, it’ll be considered a seller’s market and the prices will appreciate.
An Upward Pressure on Prices
Considering the shortage of homes for sale on the market right now, there’s an upward pressure on prices. Let us elaborate using simple economics; when the demand for an item is high but there’s less of it available for sale, people are willing to pay more for it.
The shortage of homes for sale is also causing bidding wars that drive prices even higher. Moreover, according to industry experts, the panic caused by the epidemic is likely to cause an increasing number of Americans to seek their own roofs – thereby, increasing the demand for homes even more.
The common consensus is that the economic slowdown caused by the coronavirus pandemic is going to bring down home prices. However, experts think otherwise. As we enter the summer of 2021, we may actually see the prices for homes rise even higher given the shortage of homes for sale on the market.