News on the housing market is booming this spring and heading into the summer and fall for good reason. There is a frenzy in the market, where buyers are becoming more and more desperate for any home sold.

This can be attributed to interest rates still at record lows, making finding the money easier and more accessible to more buyers. On top of that, the re-opening of the US is causing individuals to want to move. The heightened motivation to buy new and used homes means more competition. Competition and lack of houses on the market mean houses are being bought at record prices.

What does that mean for the future?

When market prices are higher than normal and demand is higher than normal, two things can happen. Firstly, there can be a market correction because people will stop buying homes. This can be brought on by increased interest rates, or individuals not wanting to compete as badly for homes. As such, the number of homes in the market will increase. Since the number of homes in the market will increase, the average prices will decrease and the market will normalize at an optimal price and quantity.

The other, less likely possibility, is the market continues to increase because the economy is still trying to recover from the economic tolls of COVID-19. If interest rates remain low, there will still be incentives to buy every house on the market. This could lead to a stabilization that creates a new normal in the market, accounting for smaller corrections than mentioned earlier.

In conclusion, this is a great time for sellers and, at least for the used home market, a bad time for buyers. However, the new home market might be worth looking into since there is less gap in price between new and used homes. Whether the market corrects itself or not, new homes are a safe bet for the long run.