Fact:  There is very little cause to believe that this will change any time soon.

Why?

1) Demographic demand.

2) Builders can’t keep up. The cost of materials has tripled for lumber, increased 22% for steel and many manufacturers are behind on shipping critical components. From toilets to refrigerators, the creation and delivery of these items are behind. Even paint is hard to get. Nationwide, the average cost to build a house is up $24,000 on average. During the pandemic, many of the lumber producers dropped to 50% production in anticipation of the housing slowdown that never happened.  

3) Inflation Hedge. 

4) Institutional investors are gobbling up anything under $200,000 and almost always paying cash. In Phoenix for example, fully 30% of recent sales have gone to investors, either iBuyers or small investors. Flippers are also buying in these price ranges.

5) The coronavirus pandemic is a short-term component stacked upon the long-term trend we discussed in the previous 3 points. People want more space, more privacy and now have the freedom to move markets.

6) Low interest rates continue to add fuel to the fire.

7) Record rates of savings in the US and a huge number of all cash transactions.

 

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