The US is in a housing boom and not a bubble.

The COVID 19 pandemic has highly affected many sectors in the US. Some of these sectors have been negatively affected, while others have been positively impacted. One of the sectors that the pandemic has highly influenced is housing. The US housing market is currently being considered as an unlikely beneficiary from the pandemic. Therefore, if someone plans on buying a home during this period, they might have to part with more money than they would before the onset of the pandemic. But, on the other hand, home sellers would also benefit from the same because they would sell their homes at higher prices.

Why housing is a boom

In June 2021, the median price for a home in the US reached a price of approximately $363000. This is roughly a 23% increase from the previous year. The housing sector has recorded the highest increase rate within the past four decades. Therefore, experts are considering this a boom rather than a bubble. The quick rate at which the price of houses rose is what is making it a boom. The rise was sudden and unexpected. This kind of boom has not been witnessed in the US for many decades.

In the last 15 months, the cost of houses in the US has dramatically risen, and experts are worried that this trend will continue to rise. This is causing the market for homes to shape like a boom instead of a bubble.

Why not a bubble?

In economics, a bubble is considered something that might burst and change its course. In this case, the market for houses is not behaving like a bubble because experts are unsure when the prices will stop increasing. Experts cannot also believe how much prices have gone up, which means the housing market is in a boom phase. In economics, a boom is considered a sudden period of economic expansion. Given the uncertainty of the future of housing in the US, its market can be best described as a boom.

The cause of the housing boom is low mortgage rates. The fixed mortgage rate was reduced from 3.45% to 2.87% in less than two years. This means many individuals can afford to buy houses such as the Northwood Iowa houses for sale. Whenever there is an increase in the demand for a product, the prices have to go up to cater to the rising demand. If the prices do not go up, the demand will exceed the availability of products, which means some consumers will not access the products. In this case, houses are products whose prices have risen to meet the rising demand caused by low mortgage rates.

Another cause for the boom is the limited supply of buildings. The US is experiencing an underbuilt housing need of nearly 5.5 million units. This means that the supply of houses is limited, and people are rushing to grab the limited available units. The only thing that can reduce this boom is increasing the nation’s housing units, which would take time. In the meanwhile, the country has to battle with the housing boom, whose future is uncertain.

The US has a demand boost caused by low mortgage rates and a reduction in the supply of houses. A combination of these two factors is what has caused a boom instead of a bubble. The high demand and low supply have pushed the fastest increase in prices over the past few decades.