Why Is the Housing Market Behaving This Way?

With mortgage rates refusing to drop, home prices continuing to increase despite those high rates, and repeated forecasts predicting more homes coming on the market—homes that never actually materialize to alleviate the shortage of available housing stock—today's housing market is awash in contradictions. It's no surprise there's a general sense of confusion about where the market is headed.

Realtor.com examines some of the biggest causes for confusion in today's market, and how new-home builders fit into the puzzle:

Many real estate experts predicted more homes would come up for sale this year, which hasn’t happened. Instead, newly constructed homes saw strong sales.

“Those two things do not usually go hand in hand,” says Devyn Bachman, senior vice president of research at John Burns Real Estate and Consulting, a company that works in the new-construction space. “There’s logical reasons why all these oddities are [now] happening.”

Builders are more successful now because they’re buying down mortgage rates, says Bachman. Some of them are buying rates down to the 5% range either temporarily or for the length of a buyer’s 30-year, fixed-rate loan. Builders are also lowering their list prices and contributing to buyers’ closing costs.

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