After more than 15 years, as a licensed real estate seller in New York State, I have come to firmly believe that the two main (and key) factors in the historic rise in home prices are extremely low, inventory, and historically – low mortgage rates! In the last year, in most areas of this nation, home prices have increased, never before, in percentages, etc.! Simultaneously, there is also extremely low inventory, from home, available, for sale, on the market. The combination of supply and demand shocks and affordability created by these mortgage interest rates are the top two drivers, in terms of rising costs, of home buying. With that in mind, this article will briefly attempt to consider, examine, review and discuss these two keys / factors, and what they indicate, etc.

1. Low inventory: Several factors have likely contributed to the current period of extremely low inventories of homes for sale in many regions / areas / localities. Some of these causes include: the tensions and uncertainties arising from this terrible pandemic; buyer – interest, because the crisis has also increased, the desire, for many, to relocate; and, the lack of certainty, on the part of the owners, about what to do, if they sold. The economic laws of supply and demand teach us that when there is limited supply (as there is today), demand exceeds it, often causing price increases. This creates what is known as a Sellers Market (more buyers than sellers and demand, creating an advantage for the seller).

two. Low mortgage interest rates: Few remember, mortgage interest rates, at the low level, as we see, today! Because of this, buyers can buy more homes for their dollars. Since most people buy a house, taking advantage of a mortgage, to finance their purchase, it is often the most important and relevant factor in determining whether or not one can afford a specific property. In that sense, it is essential to remember and appreciate a difference of 1%, for example, in a house of $ 200,000 (which, with a 20% down payment, requires a mortgage of $ 160,000), it comes to approximately $ 100 per month, difference / savings. In many regions, the median mortgage is much higher, meaning that a $ 400,000 home (with a $ 320,000 mortgage) sees a $ 200 monthly difference and a $ 600,000 would create savings of $ 300, at the lowest rate. While this allows more people to buy houses, it also results in additional demand and higher prices.

When you better understand the relationship between these two factors and the housing market, you will be better prepared to proceed, wisely, using the best approach and making the best decisions for you. Will you be a more conscientious, wiser potential home buyer?