Thinking of buying or selling in the near future? Just interested in the real estate market?
While the pandemic hampered home sales in the spring of 2020 (which is traditionally the busiest season for real estate), the market swiftly recovered.
According to real estate analysts, the spike in home money by the end of 2020 compensated for the market’s deficits in the spring. The housing industry was drastically impacted during the COVID-19 pandemic.
Sellers decided to press pause on their endeavors, while buyers, incentivized by low mortgage rates and the need for more space, entered the market in record numbers.
This led to low inventory and high demand — in other words, an extremely strong seller’s market.
However, the market is ever changing, and these conditions may soon be shifting as the economy recovers and sellers head back to the market. If you’re thinking of dipping your toes in real estate in the coming months, be aware of these key trends.
1. Bidding wars finally retreat as inventory plays catch up
According to HomeLight’s End of Year 2021 Report, approximately 62% of real estate agents claimed bidding wars in their markets were on the decline. This is up from 3% the previous quarter.
While the vast majority of agents claim homes are still getting multiple offers, an average listing is only seeing a few bids per home — unlike early in 2021 when agents saw 20-plus bids per home.
Most real estate agents claim this is mostly due to buyer exhaustion. As they’ve been competing in an overly intense seller’s market for the better part of a year, they’re now opting to sit on the sidelines and wait for the market to level out.
These bidding battles can drive up prices so much that sellers may think twice about taking severe actions like selling to a home buyer.
Luckily for them, the market may indeed be doing just that. The percentage of agents claiming inventory is lower than expected declined by 28% this quarter. While inventory is still low, sellers are starting to rejoin the market now that vaccines for the coronavirus are readily available to all who want them.
2. Prices have reached their peak
Home prices are still well-above average, yet, while 95% of realtors claimed home prices were on the rise last quarter, only 53% felt the same this quarter. In fact, about 50% of agents claim price reductions are becoming more and more common in their markets.
However, this reduction could be the ultimate result of sellers, unaware of the increase in inventory, overpricing their homes from the get-go. Reductions are just the inevitable result of that mistake.
In fact, sellers, who’ve caught onto the favorable market conditions, are eagerly entering the market. However, with an increase in inventory, we can expect to watch home prices drop in the coming future.
Don’t expect these changes to happen overnight though. Demand is still high and buyers still outnumber sellers. While buyers are growing tired of competing for overpriced listings, selling your home in the current market will undoubtedly turnout a profitable result.
3. Pandemic savings may fuel next round of homebuying
As noted, buyers — either too tired or too savvy to compete in the current market conditions — may be pressing pause. However, a new spike in buyers may be soon approaching.
While the pandemic sparked a wave of buyers spurred by remote work relocations and low mortgage rates, many potential buyers without significant savings couldn’t swing the astronomical home prices.
Along with the conclusion of the school year propelling the market growth, many who bought a second house may sell their residences once in-person learning resumes full-time.
They want to establish roots in a location where their children may enjoy the great outdoors and have more space to play. Property owners may still require assistance with their mortgage payments.
The market is still struggling, and homeowners are still in need of financial assistance. Despite the fact that the Biden administration has prolonged loan deferment until June 30th 2021, homeowners may become restless and lose their property for cash in order to escape default or other consequences.
Though, while some found financial hardships during the pandemic, others got to saving. Instead of attending concerts, going on vacation, or keeping up with fashion trends, many spent the year at home saving up.
Since buyers are still highly incentivized to enter the market due to the low mortgage rates, we may see a mass of post-pandemic savers heading into the market in the coming year.
As a property investor, it’s critical to keep up with the current developments in order to know how to go forward where the market is going, what changes are developing, and how you can maximize your investment.