Let’s discuss the housing market

Low mortgage interest rates (still well below 3% in many areas) generating high demand combined with relatively low supply and the price of materials spiking (particularly lumbar).

Building materials shortage.

I work with real estate valuation. It's a perfect storm:

-price of lumber on the cost side
-insanely low interest rates boosting demand
-insufficient inventory due to slow permitting for new construction in the years following the financial crisis
-pent up demand from previously unqualified or cautious buyers after the financial crisis
-some fear of rates going up

I'm probably forgetting some things, but these are the ones that immediately come to mind.

These list-to-price ratios and bidding wars are unsustainable in the long run. The problem is nobody has the crystal ball to say when the tide will turn.

I've had agents and appraisers who are close to retirement tell me they've never seen a market like this. There aren't enough appraisers and attorneys in our markets to meet demand. Closings are scheduling 6+ weeks out.

People fleeing New York and California.

Definitely a bubble.

Don't forget to factor in people not selling because they don't see value in selling, and buying local. Yeah it's a good deal for migrants from CA, etc, but not really for people wanting to stay nearby. Unless willing to put stuff in storage, rent, and wait for the bubble to bust.

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What is going on?

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Building a home is too expensive right now

A house with my floor plan in my neighborhood with no updates in 20 years just sold a couple weeks ago for 40% more than I paid for my home 3 years ago. I’ve seen houses that were built for $200-250k in the 90s going for $100k over listing price in the $800k range. The current market just isn’t sustainable. Sure, it’s a great market to sell, but where exactly are you supposed to find a new home to buy if you sell? Our neighbors who just had an unexpected kid (they already had 4) can’t find a home anywhere. They keep getting outbid. It’s insane.

we bought a house and close next week

when we were looking, not a thing anywhere that we wanted. out realtor even said she was practically knocking on doors to see if people wanted to sell their house. I thought she was kidding.

but I will say, the past few weeks I have noticed tons more for sale signs around town.

the next couple months could be interesting

All good points mentioned. Perfect storm seems very true.

But think of what the PANDEMIC actually created...

For many months, building, buying, sales & PRODUCTION on all levels of the supply chain went to close to ZERO. We have never experienced such an occurrence to rebound from. Now demand is way greater than the supply of homes.

Covid created a shift in how people are living and working
The work from home thing is likely going to stay in some form.
That means people can move from an urban area to a sub or rural area and do their job.

Interest rates are low enough to keep the money flowing.

Building costs are at historic highs. Lumber just hit an all time high this week. Other building materials are high too.(metals, cement). Then there’s a shortage of appliances and other materials... it can be a pain in the arse to build.

Then there’s the opportunistic selling going on. I saw some recent houses go on the market just because neighbors got historically high prices. Still though, house inventory is below demand. Agents are knocking on doors now to see if people want to sell. Last time I saw that was 06.

I think the only thing that can slow the pace is a correction in the cost to build and/or an interest rate hike but I don’t see much chance of the latter.
I thought building costs would drop as we got out of covid but they’re still very high. It’s unsustainable though and will correct. That will give buyers some options.
The outlier would be some bump in the economy and we might see something along those lines but I don’t see it anytime soon.