The real estate market has been on a wild ride since the COVID-19 pandemic began, and homes for sale in Baton Rouge are no exception. In two years, the number of houses on the market fell by almost 60%, causing home prices to rise by 25% and creating a seller’s market. Data from the Federal Reserve blames increased demand and reduced supply, but other factors may have played a role.
Why Did Home Sales Rise During the Pandemic?
Between December 2019 and December 2021, there was an unprecedented increase in home sales. Mortgage rates reached record lows, quarantined workers wanted better workspaces in their homes, and the desire for outdoor entertaining and play areas soared. For quarantined workers in tight quarters, buying a home seemed like a good idea.
Zillow combined information from the U.S. Census Bureau with its own statistics to analyze the housing market. Before the pandemic, experts expected an increase in demand in 2020 as millennials reached their 40s and bought homes. When Millenials started working at home and no longer needed to commute, over two million renters in that age bracket could live in homes that weren’t within driving distance of their jobs. The stream of buyers into small towns and rural areas caused home prices there to rise unexpectedly.
What Caused the Housing Shortage During the Pandemic?
The housing market operates on supply and demand, and the demand for housing during 2020 and 2021 was unprecedented. Economists at Goldman Sachs say the housing shortage may persist after other shortages, such as cars and appliances, go away. The supply has slightly increased, but there are no quick solutions.
Homebuilders are facing a shortage of building materials, laborers, and residential lots. During the pandemic, some sellers were nervous about opening their homes to buyers and didn’t put them up for sale. Besides, the inventory was already low because new construction had dwindled after the real estate bubble burst in 2008.
Economists measure supply by counting the number of months it takes to sell the inventory on the market if no other homes become available. In a balanced economy, there’s a supply of around six months. In September 2021, the supply was down to 2.6 months, the lowest since record-keeping began.
What Is the Real Estate Forecast for 2022?
2022 will be a year of sharp competition for home buyers, and bidding wars may continue. Redfin, an online real estate brokerage, says home prices should not go up as quickly as they did the past two years. New construction will increase slightly in the second part of the year, and rising home prices could slow to around 3%.
If you’re looking for homes for sale in Baton Rouge, be prepared to act quickly when you find something you like.