Housing demand likely to remain strong for years

A common question being asked by many these days is whether this hot real estate market can last? If so, for how long? Although nobody has a crystal ball to tell, it appears that the high level of housing demand should last for some time still. While higher housing costs and mortgage rates will erode some buyer demand, the sheer volume of current buyers should keep the overall market quite strong.

What is causing this sustained high demand?

There are several factors impacting the current strong demand for housing. For starters, we can observe the low rates of household formation since The Great Recession (December 2007 – June 2009). This resulted in approximately 5.7 million missing households that would have otherwise been formed during this time.

Fast forward to the present time and Americans of every age and ethnicity are forming households at lower rates than before The Great Recession. Many of these people are opting to live with parents into adulthood or doubling up with roommates instead of buying or renting a home on their own or with a partner. The major culprit for this demographic is the severe shortage of affordable housing though.

A continued wave of housing demand

The high number of the delayed household formations combined with the large millennial generation aging into peak home buying age should keep housing demand high for the foreseeable future. During the years of 2018 and 2019, America saw the largest economic expansion in its history. This brought on an increase in household formations, but the momentum was lost once the pandemic halted economies throughout the world.

Many have looked to new home construction as the answer to address the chronic low inventory of homes for sale. Of course, construction was depressed for several years after the Great Recession and even now remains low by historical standards. For perspective, we were building about three homes per 1,000 Americans per year in early 2020, compared to a historical average of almost four. A shortage of buildable land and the financing to acquire it, combined with shortages of labor are contributing to the shortfall.


Overall, solid fundamentals remain for the housing market. These include low interest rates and high buyer demand. The lingering effects from the pandemic-induced recession are yet to be seen. Furthermore, new home construction will continue to play a pivotal role in the housing market.

Less access to home ownership will continue to result in higher demand for rental housing. This will lead to higher rental prices, thus making it more difficult for Americans to save money for a down payment on a home purchase. We still expect the large, older millennial demographic to represent a larger proportion of the home buyer population in the near future. In addition, we will also witness Generation Z buyers entering the market as well.

The real estate market in South Florida is currently as strong as it ever has been. This makes local knowledge and professional guidance even more critical than ever. Are you ready to buy or sell a home in South Florida? If so, we can help. Contact Live South Florida Realty, Inc. today!

By natasha@livesouthfl.com

REALTOR® with Live South Florida Realty, Inc.