As financial writers, we keep an eye on the market and collect information from as many sources as possible. That helps us to identify trends. Of course, we can't see into the future or know what will happen next, but our educated guesses are based on experience and know where to look for answers.

Nobody knows if another pandemic is just around the corner, if a war will break out or if anything will turn our current assessments upside down. But from what we know today, here are five reasons why we don't see the real estate market cooling off anytime soon.

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1. Mortgage rates remain temptingly low

The current rumor surrounding the water cooler is that the Federal Reserve may raise interest rates to prevent inflation. The base rate is not the rate we pay on a loan, but it is the base rate that banks set their interest rates on.

At this point in time, despite speculation, there are no signs that the Fed plans to raise interest rates. In fact, they have announced that they will keep the key rate near zero until 2023. And as long as mortgage rates stay around 3%, mortgage loans will be in high demand.

2. The supply of apartments continues to shrink

It's no secret that there are still more potential home buyers than properties for sale. At the current sales rate, it would take five weeks to sell each home in the Austin, Texas market. With poor inventory across the country, there is a backlog of buyers hoping to land a property they love.

3. The number of buyers continues to grow

Millennials aren't the only people buying homes, but they are driving demand for new mortgages. As the largest generation (now outperforming baby boomers), millennials have graduated from high school, starting families, and looking for places to put down roots. Over the past three years, the proportion of home ownership among millennials has increased from 40% to 47.9%. According to First American Financial Corp. they are likely to be responsible for 15 million home sales over the next decade. The desire to own a home doesn't seem to be working in the US anyway, and millennials are just getting started.

4. It will take time for the builders to finish

When we look at markets like Austin, San Jose or the scorching hot Manchester in New Hampshire, the need for new housing is easy to see. Current building material prices make it difficult for builders to make the profits they need to survive, which is tantamount to a decline in new jobs. The labor shortage has also exacerbated the problems facing construction workers, which means it will take time for new buildings to alleviate the shortage of available housing.

5. Pending sales as a predictor

According to the National Association of Realtors (NAR), pending home sales rose 8% in May from April. In addition, they increased by 13.1% compared to 2020. COVID-19 was clearly a factor in 2020, but pending sales are still considered a "forward-looking indicator" of how healthy the housing market will be in the months ahead. A pending sale indicates that the seller has accepted an offer for their home but may be waiting for a higher offer. Because of this, it often takes a month or two for a pending sale to become a legitimate sale. If upcoming sales are rising, it is a good sign that the market is resilient.

While we can't say for sure how long inventory will remain low or demand high, we can say that we are not betting on cooling anytime soon.

source https://seapointrealtors.com/2021/08/11/5-signs-the-housing-market-is-going-to-remain-red-hot/

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