Commercial Real Estate
According to Trading Economics, “commercial real estate prices for the United States reached a record high [% Chg. from Yr. Ago] of 16.59400 in January of 2005 and a record low of -29.86300 in July 2009.” However, the homeownership rate skyrocketed to 65.30% in the first quarter of 2020, increasing from 65.10% in the fourth quarter of 2019.
May experienced the highest peak for new home sales. Single-family houses increased 16.6% month-over-month, which had an annualized rate of 676,000. This percentage is about four times higher than the forecasted 2.9% rise. The figures for May are the highest that they have been in three months.
Trading Economics also noted that “At May's sales pace it would take 5.6 months to clear the supply of houses on the market. The median new house price rose to $317,900 from $312,700 a year ago. Year-on-year new home sales jumped 12.7%.”
While these numbers sound promising, there is still a short supply of houses. Home sellers are apprehensive about selling, and younger home buyers are trying to find bargain houses amid low mortgage rates. This is known as the “V shape” of commercial housing since there was a strong comeback before the pandemic with a lack of supply, low mortgage rates, and house hunting. However, it is still continuing to grow.
It is predicted that after August, the property market will drop again, which will be a problem for commercial real estate prices. Health experts predict that the pandemic won’t be going away anytime soon. Furthermore, the unemployment rate is expected to increase, which means that people will be struggling to buy new properties.
The housing market is only an advantage to those who can currently afford it, but even financially prepared home buyers could be halted by the short supply.
The only positive turn for home sellers at this stage is if home buyers wish to bid on the house. The short supply rat race among young home buyers means that buyers could place a higher bid against their competitors to secure the house.
However, because home sellers are still unsure about selling their properties, it doesn’t solve the short supply of houses. This problem could be fixed with the construction of new property housing, which would attract buyers with a low mortgage rate.
Provided the economy experiences a large turnaround in a short period of time, an increase in the employment rate could lead to stability for both homeowners and home buyers regardless of income.