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4 Signs the Housing Market Could Cool Down

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4 Signs the Housing Market Could Cool Down


April 12, 2021
Framing of a house
Photo: Christian Delbert | stock.adobe.com

Financial services company Jefferies says the current market is poised for a healthy and much-needed slowdown in the near future. Rising home prices, low inventory, rising mortgage rates, and pent-up demand are just some of the factors plaguing the market, but there are four factors that may change that. Jefferies says construction will shift, noting that a shortage now offers builders an opportunity, reports Business Insider. Additionally, more Millennials heading into homeownership age will push builders to ramp up production. There are 9% more Millennials aged between 25 and 34 than 35 to 44, signaling an upcoming wave of buyers and demand.

The bank's modeling suggests monthly housing starts will land between 1.7 million and 2 million through 2024, markedly higher than the February reading of 1.4 million.

(3) Home inflation set to cool
Expectations for stronger inflation contributed to soaring lumber prices over the past year. Costlier building materials were estimated to be adding $24,000 to the cost of every new home, further boosting prices amid the supply shortage.

That pressure will soon be alleviated as the economy reopens and commodity-price inflation moderates, the team said. Futures contracts suggest lumber prices will sink 26% through 2022, just as construction picks up to match robust demand, it added.

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