Lawrence Yun, chief economist of the National Association of REALTORS®, summed up the current state of the housing market in one word to NPR recently: “Incredible.”
Homes for sale are, on average, getting 5.1 offers before they sell and reports of homes getting 20 or 30 bids are growing; home prices are up 19.1% from a year ago, and the median sales price has reached a record high of $341,600, according to NAR housing data.
But strict mortgage underwriting is ensuring people can afford the homes they are buying, unlike the frenzy that led up to the housing bubble more than a decade ago. Also, the limited number of homes for sale is driving up home prices.
So is “FOMO,” or the fear of missing out, Yun said.
Home prices are rising quickly and mortgage rates are near historical lows. Some home buyers may be panicking and believing they need to buy a home right away.
“They are experiencing the fear of missing out,” Yun told NPR. “But at the same time, people feel very uncomfortable needing to make a rushed decision on such a major expenditure.”
Home prices are expected to continue to rise, but not at such a fast clip over the coming months. Prices have been outpacing income growth for several years now.
“We anticipate that the market will be steadily calming down,” Yun told NPR. REALTORS® recently surveyed by NAR predict that over the next year, a smaller gain will occur in home prices of just 2.5%, considerably lower than the 19.1% jump this year. More housing inventory is expected to hit the market too as more of the country gets vaccinated and pandemic-related housing protections such as forbearance moratoriums expire.