Jumping home values during the past two years fueling the hot real estate market in many places in the country came from a variety of factors, Freddie Mac reported this week.
The federally financed home financing company, chartered by Congress in 1970, operates in the secondary mortgage market, buying loans from approved lenders, which gives it the ability to issue more mortgages and get more Americans into homes of their own, according to the organization.
The company reported Thursday that home prices jumped 33% nationally during the past two years, due in large part to low mortgage interest rates, lower home inventories from underbuilding and fewer distressed sales, and the migration of people out of the cities to more suburban and rural parts of the country.
Despite the COVID-19 pandemic, interest rates dipped to a low of just 2.7% in 2020, almost 2% less than the 4.7% rate in 2018, helping homeowners looking to refinance and adding demand for homebuyers getting into the market.
The company said lower home inventories, which were already experiencing a shortage before the pandemic hit, also caused prices to move upward with fewer homes available compared to buyer demand.
"An increase in home sales and a drop in homes listed for sale are both clearly discernible (in the data)," the report said. "Sales would have been — and still would be — even higher if more homes were available for purchase."
The pandemic exacerbated the problem with a construction slowdown due to higher prices for wood and other materials caused by the lockdowns and worker and supply chain shortages during that time.
There was also a drop in the number of "short," or distressed, sales with those listings decreasing from 8% to 3% during 2020 and 2021, the report said.
The final piece of the puzzle was the "accelerated migration" of people from metropolitan areas to more rural locations in the South and in the West, with mid-sized metropolitan areas with populations of between 500,000 to 1 million seeing the largest increases, while the largest 25 cities saw migration out of those locations rise by three times the prior rate of exodus, according to the company.
Sun Belt states like Florida, Tennessee, Georgia, North and South Carolina, and Texas, saw 20% or more increases of population, as did several mountain states in the West, including Montana, Idaho, Nevada, Utah, and Arizona, according to the report.
According to the National Association of Realtors, Florida currently has the top five hottest commercial real estate metropolitan markets, including Orlando, Miami, Palm Beach, Fort Lauderdale, and Fort Myers.
Part of that index’s calculation considers the migration of people moving into the area.
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