Low Mortgage Rates, Low Inventory, Migration, Causing Boiling Real Estate Market

June 11, 2022

Montana Mortgages

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The rise in home values ​​over the past two years, which has fueled the boiling real estate market in many places across the country, is due to a variety of factors, Freddie Mac reported this week.

The federally funded housing finance company, licensed by Congress in 1970, operates in the secondary mortgage market, buying loans from approved lenders, giving it the ability to issue more mortgages and bring more Americans in their own homes, according to the organization.

The company reported Thursday that home prices have jumped 33% nationally over the past two years, largely due to low mortgage interest rates, falling home inventories due to underconstruction and declining distressed sales, and the migration of people out of cities to suburban and rural parts of the country.

Despite the COVID-19 pandemic, interest rates have fallen to a low of just 2.7% in 2020, nearly 2% lower than the 4.7% rate in 2018, helping homeowners looking to refinance and increasing demand from home buyers entering the market.

The company said falling inventory of homes, which were already in short supply before the pandemic hit, has also driven prices higher with fewer homes available relative to buyer demand.

“An increase in home sales and a decline in homes listed for sale are both clearly noticeable (in the data),” the report said. “Sales would have been – and still will be – even higher if more homes were available for purchase.”

The pandemic has exacerbated the problem with a slowdown in construction due to rising prices for lumber and other materials caused by shutdowns and worker and supply chain shortages during this time.

There has also been a drop in the number of “short” or struggling sales, with those listings falling from 8% to 3% in 2020 and 2021, according to the report.

The final piece of the puzzle was the “accelerated migration” of people from metropolitan areas to more rural areas in the South and West, with medium-sized metropolitan areas with between 500,000 and 1 million people seeing the biggest increases. , while the 25 largest cities, according to the company, have seen migration out of those places increase by three times the previous exodus rate.

Sun Belt states like Florida, Tennessee, Georgia, North and South Carolina, and Texas saw their populations increase by 20% or more, as did several western mountainous states, including Montana, Idaho, Nevada, Utah and Arizona, according to the report.

According to the National Association of Realtors, Florida currently has the top five metropolitan commercial real estate markets, including Orlando, Miami, Palm Beach, Fort Lauderdale and Fort Myers.

Part of the calculation of this index takes into account the migration of people who settle in the region.

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