5 Reasons this housing boom is different:
The housing boom of the early 2000s compared to the current market of 2020-2021 differs in MANY ways. Some of the reasons are logical and others are just an off-shoot of COVID-19 related issues and the pandemic.
1. Historically low interest rates
One of the reasons that spurred the recent "flurry" of purchasing, is the historically low interest rates. Buying power has greatly increased and most know if you are going to make a move, this is the "best" it is going to be mortgage-wise. It is cheaper to buy now than it is to rent--a definite change from the past.
2. Very low levels of inventory
The current inventory is EXTREMELY low compared to new construction in the early 2000's. Most builders now have models and will build "custom" from those, and do not have inventory "sitting on the shelf." Before the housing crash, there was abundant inventory to choose from in the existing home market as well as new construction--ready to move in. In the early 2000's, Relocation buyers were transferred to the Chicago-land area due to companies consolidating --such as BP Amoco---closing or pairing down their Ohio and Texas locations. This drove up the prices as they started bidding against each other for homes in a close proximity to their new job locations.
3. Emotional factors from the pandemic
The pandemic caused more urgency in moving out of the city environment quickly, as well as the new ability to work from home, and E-learning for school-age children. Prices are up 5-10%, but nothing like the rapid appreciation and "sky-high" appraisal values in the early 2000s. At that time, buyers could buy homes with no money down loans, other risky loan products (interest-only loans), and everything would "magically": appraise. Today the minimum is 3.5% down, credit scores need to be much higher to qualify for the loans, and appraisers are VERY ACCURATE in their evaluations---as if mistaken and loan defaults in a short period of time, there are recuperations that fall on them...
4. Move in ready homes
Homes are now 20+ years older than in the early 2000s and have become outdated and many need new roofs, HVAC mechanicals, new windows, updated baths, and kitchens---all VERY expensive items for the buyers to assume. Consequently, smart buyers, today want "move-in" ready" homes, so their cash is not consumed with home improvements. The demand is HUGE--many are getting multiple offers on the first day---many going over the asking price, if originally priced correctly.
5. Downsizing
In the early 2000s Baby Boomers were moving up to much larger homes that they felt they deserved and worked hard for and millennials, today, want more affordable updated homes with functional, multi-faceted floor plans, decent size yards for outdoor entertaining, kids play, gardens, and privacy. Baby Boomers, now 20+ years later, are downsizing and need a first-floor master bedroom, and, if possible, ranch homes. Updated ranch homes in desirable locations can, and usually do, sell in one day with multiple offers due to pent up demand. The commonality between the two periods of time is that BOTH were/are in a Seller's Market, you have to view homes IMMEDIATELY, have finances in order, make a very strong offer, and be prepared for possible multiple offers.
That is why having a great experienced real estate team to help you in all aspects of buying and selling is important---more so now than ever!!!