Nothing Is Stopping Motivated Homebuyers
When the pandemic took hold one year ago, the real estate market came to a halt. Many were put under emergency lockdowns and home purchases stalled out. However, once people were allowed back out of their homes, they flocked to buy new homes. Home sales in 2020 far outpaced home sales in 2019 and the real estate market thrived. Now that the first quarter of 2021 is ending, some new data might worry some real estate market watchers. New home sales in February dropped well below their January levels. Does this mean the red hot housing market is cooling down? Does this mean that homebuyers have finally had enough? The team at Peoples Choice Mortgage wants to take you behind some of this data to give you the full picture. When you look at all the numbers, the housing market is strong as ever and nothing is stopping motivated homebuyers.
The Numbers Behind February’s Decline in New Home Sales
If you look at the numbers of how many new homes were sold in February in a vacuum, the data seems dire. Experts predicted new home sales to drop by a little over 5% in February. Instead, new home sales dropped over 18%. Typically, an 18% decline in purchases is taken as a flashing red warning sign that the era of good feelings is over. However, that is not true in this instance. The sky is not falling. The real estate market is not crashing. In fact, the housing market is incredibly healthy and poised to go higher. How can that be?
Home Sales are Still High
Although an 18% drop in home sales from January to February might seem like the bottom is falling out of the market, it is not. It is important to look at drops in activity levels in the context of where they are relative to other points in time, not just last month. Even though home sales declined from January’s levels, they are still much higher than pre-pandemic levels. If we saw the numbers for home sales in February of 2020 that we saw in 2021, we would have been ecstatic last year. These current numbers only seem catastrophic relative to how hot the housing market has been.
Reason Behind the Drop Off in Home Sales
Some have been worried that a combination of rising mortgage rates and higher home prices would eventually cause a decline in new home purchases. However, that is not what happened in February. February’s numbers have nothing to do with a decrease in demand. Instead, this was entirely a supply issue. The inventory of homes available for purchase has reached record lows. Quite simply, there are plenty of potential home buyers who are looking for the house of their dreams. There just are not enough houses for sale to satisfy the demand.
Mortgage Rates are not Deterring Home Buyers
Although it is true that mortgage rates have been increasing, that has not decreased demand from home buyers. And that’s because today’s mortgage rates are similar to last month’s numbers for home sales; they’re all relative. Although mortgage rates are rising, they are rising from historic lows. When compared to mortgage rates from previous years and decades, mortgage rates still offer home buyers a lot of value. That’s why Fannie Mae is predicting that home sales will continue to be strong throughout 2021, in spite of rising mortgage rates. Just because you missed out on the lowest possible rates, it does not mean that today’s rates are bad. People who want to own a home of their own recognize that today’s rates still offer a tremendous opportunity to buy a home and build wealth.
Final Thoughts
February’s home sale numbers should not scare anyone. The housing market is still incredibly strong and demand for new homes is very high. This is great news for homeowners and those who buy a house in the near future. The large demand coupled with limited supply means that home prices and home values should continue on an upward trajectory. Owning a home is an incredible way to build wealth for yourself and future generations. This is especially true when it is extremely likely that home values are on the ascent. Even as mortgage rates and home prices increase, do not expect home sales to fall off a cliff. Remember, millions of Americans are still waiting on tax refunds and stimulus checks, which can be used for a down payment.
Regardless of what February’s data looks like, it is still a fantastic time to stop paying rent and buy a house of your own. While the outlook for the housing market is still overwhelmingly positive, there are tremendous benefits to buying sooner rather than later. Applying for a mortgage now and trying to buy a house now means that you can get a house before rates and prices climb higher. Lower rates and lower prices mean that the cost of your mortgage over the life of your loan is significantly lower. If you want to buy a house then now is the time to do it! If you do not want to miss out on your window of opportunity, contact us! The team at Peoples Choice Mortgage is here to find the perfect options for your exact financial situation.
