5 Reasons Why There Is Demand For Housing Right Now

Brick house with white trim and a green roof on a neighborhood block. The housing market still has strong demand from buyers.

5 Reasons Why There Is Demand For Housing Right Now

There are numerous signs that the purchase market is coming back to life and that there is an increasing demand for housing.

Anecdotally, the number of pre-approval requests in our office are up over 50% from our March and April averages.

The number of ratified contracts rolling in has surged to levels not seen since last spring, with 13 coming in last Monday alone.

Most interestingly, I was told during a webinar last week that Zillow searches are up 20% year over year!

And, a close friend of ours who runs a huge digital document processing firm says her purchase-related volume has surged by 40% over what she saw in March and early April.

So, why is there so much demand for housing during these particularly tumultuous times? (I am adding a new factor today that is significant)

Reason #1 – Demographics.

I hit this over and over and most recently here. Millennials are forming households much faster than new housing is getting built. Hence, demand remains strong relative to supply and this will likely continue to buoy the market, irrespective of economic conditions – and many buyers know this.

Reason #2 – Inflation Hedge.

Housing is an excellent inflation hedge. We will likely see deflation in coming months, but once all the dust settles inflation seems all but inevitable at some point b/c of all the new money that is getting created out thin air right now. When the dollar becomes worth less and less, real estate will likely hold its value – like we saw in the 1970s. I have a friend who recently bought three homes solely as an inflation hedge, at the urging of her financial advisor.

Reason #3 – Low Rates.

When rates are this low, housing is much more affordable. Locking in rates this low is an opportunity of a lifetime.

Reason #4 – More Flexible Sellers.

We are seeing sellers act much more flexibly in this market, creating more opportunities for buyers. We are seeing price reductions as well as closing cost and repair credits granted in ways we have not seen for years.

Reason #5 – Foreign Buyers. (This is the new one!)

As precarious as our economy is, the rest of the world is far more precarious in many cases and foreign investors know this. As a result, they will again be investing in U.S. real estate as a way to protect their capital. We are already seeing this happen in fact and it too will drive up home prices.

So, can I guarantee that the housing market will remain strong? No.

But recent signs, despite our sagging economy, look very good.