How technology affects home prices

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Real Estate

Falling interest rates and the pandemic are the top two reasons for house prices skyrocketing over the last year and a half but there’s another reason no one talks about.

Today’s technology simply makes it easier for house prices to increase when buyer demand increases. If house prices are indeed more sensitive to increases in demand, it would make house prices higher but also more unstable. 

The huge house price increases in the 2020s were started by mortgage interest rates falling from 4.9% in November 2018 to 2.7% in December 2020. By the end, with the same monthly principal and interest payment, house buyers could borrow 30% more money so they were bidding up house prices along the way. Prices really took off in the summer of 2020 after mortgage interest rates had been falling steeply for over a year and a half. 

Covid-19 changed the market, as well, of course. A lot of that was also based on new technology. Zoom and similar technologies made work-from-home a lot more practical for some people and some of them bought houses farther from work or bought second homes because they could spend more time at their second homes with work-from-home.

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