The current real estate market is historic. Low interest rates are fueling high demand, but a shortage of inventory has complicated the buyer’s journey. Throw a global pandemic into the mix, and we are looking at a real estate market nationwide that nobody has witnessed before. Today’s buyers and sellers face unique challenges, and it's never been more important to have a trusted real estate professional by your side to navigate through these conditions.
Housing Inventory is low. In Late 2019 there was a 3.9 month supply of housing inventory available.* In April 2020, there was a 4 month supply and one year later, in April 2021, that supply had dwindled to 2.4 months (a near record low.)
Increased demand has inventory extremely tight, but home builders are starting to pick up the slack. Though you can expect the price of a new construction home to increase, as rising lumber prices have added $35,872 to the average price of a new single-family home.
You can see the inventory shortage play out in the limited number of listings available in many South Shore towns. Across the Northeast, there has also been a post-pandemic rebound in home sales, making the market very competitive. Existing home sales in the Northeast are up 730,000, a 30.4% year-over-year increase. The median price of a home for sale in the Northeast has also increased to $381,100, up 22% year-over-year.
This is Not a Bubble
The housing market is hot but leading economists say a crash is not imminent. Things are different now than they were in 2008.
- The current combination of low inventory and high buyer demand means the risk of overbuilding is minimal.
- Down payments are up - More money down means more equity at the start. Leading up to the market crash in 2008, down payments were low.
- In 2007, 45% of first time buyers financed 100% of their home compared to only 17% in 2020.
- Before the 2008 market crash, more buyers gambled with adjustable-rate and fixed-then adjustable-rate mortgages. 15% in 2008 vs 4% in 2020.
- Lending restrictions are tight - It’s harder to qualify for a mortgage you can’t afford. Foreclosure filings were at a 15-year low in February 2020 before pandemic forbearance.
What To Expect for Buyers
While mortgage rates are expected to increase slightly, they are still hovering at historic lows, making homeownership more accessible for many new buyers. However, both first time buyers and more experienced buyers will need to be flexible in order to secure their dream home.
Many buyers are making changes to sweeten the deal, such as:
- Higher down payments - About $9,000 more per buyer.
- Paying above asking price - 34.4% of buyers are paying over asking, up from 21.2% in 2020.
- Waiving contingencies like inspection and finance.
- Paying with cash - 33.5% of non first time buyers paid with cash in April 2021, vs 26.3% in April 2019.
What To Expect for Sellers
This is a strong seller’s market. When the home price is right, the process will be quick, so sellers should be prepared. Anticipate multiple offers -- the average is 5 in 2021, vs 3.4 in 2020. 88% of recently sold homes spent less than a month on the market and 42% of homes sold above asking price. Before listing, take the time to make a few small improvements or staging changes to your home. Know that buyers are looking for improved outdoor areas, room for a home office, separation of space and an area for a home gym.
How Can We Help?
We appreciate your interest in the 2021 Real Estate Market. If you're thinking now is the right time to buy or sell a home, we'd love to set up a free, no-obligation consultation to discuss your goals for buying or selling. Contact our office at 781-635-9022 or firstname.lastname@example.org to get started.
*Stats and data provided by Brian Buffini's Real Estate Report - US Edition 2nd Biannual 2021.