Experts Offer Overview of Real Estate Market

Google reported last week that the search question, “When is the housing market going to crash?” spiked 2,450% in the past month. We have a classic supply and demand issue, coupled with some of the lowest mortgage rates on record and a national reshuffling of population groups that has sent prices soaring higher in 2020 than any year since the Great Financial Crisis.

Realtor.com reports the national median list price at $375,000, up 17% from the year before. Listings are down nationwide 53% and even more in some areas of Prescott. Locally, if no new homes came on the market, we would sell out of the current inventory in less than one month.

The first factor driving demand is a huge demographic shift that has been steadily unfolding for the past several years. There are 72 million millennials who are in their ideal buying years when they are starting families and in the prime of their careers. The median age of a first-time home buyer is in their mid-thirties and there are tens of millions of Americans at or approaching that age. Coming up right behind the millennials we have Generation Z.

We have experienced a lack of supply for multiple reasons. Construction has been down for several years, and that has affected the number of available starter homes. The National Association of Realtors predicts we would need 3.8 million new homes to handle the current demand and they just can’t be built quickly enough. There is a labor shortage of skilled workers, a lack of materials in the supply chain, and costs have soared, with lumber topping the charts at 300% higher than the same time last year, according to the National Association of Home Builders. There is also a shortage of available lots that are prepped and ready for construction, so it will take several years to see building ramp up to the levels needed.

We saw listings being pulled off the market last year as sellers hesitated to have buyers inside their homes during the pandemic. At same time, Americans became frustrated with the homes they have been living in on average eight to 10 years as they stayed at home more and realized their needs for a home had changed.

What about the mortgages in forbearance as a result of the pandemic? The Mortgage Bankers Association reported in April that a majority of the loans are exiting the program because they either caught up or have a workout arrangement in place. Only 16% of those loans are noted as still in trouble. Homeowners who purchased as late as 2018 or 2019 have also benefited from the recent equity gains, so if a sale becomes necessary, they could do it prior to a foreclosure.

What does this mean for buyers?

Preparation, patience and working with a professional are key. Buyers need a full-time professional agent on their side who is connected and can keep them posted about “coming soon” listings, and is available to get them in to see homes and write offers quickly. Most homes are getting multiple offers, so it’s important to be prepared, write a strong offer and know where you can be flexible and what not to give up in the negotiation process. It will likely take a few offers to win the bid, but look at getting into the housing market as a win right now because interest rates are low and data and demographics point to housing appreciation ahead. The market is not favoring buyers who have a home to sell before they can move, so many sellers are asking to rent back from the buyers while they search for their next home.

Sellers, there is no time like the present to get your home on the market! We expect buyer demand to remain strong through 2021, but there are signs our extreme seller’s market is beginning to shift. Every busy agent can share a story of a would-be buyer that decided to either not buy now or buy in another area as they just couldn’t find something available in their price range.

Tennessee, North Carolina and Idaho are all popular destinations for those looking to relocate from other states and considering Arizona. As more people are vaccinated, it is expected we will see more sellers feeling comfortable about putting their home on the market even as agents have become adept at selling virtually. Investors are being encouraged to put homes on the market now in advance of new capital gains tax legislation, or just as they are moving toward retirement and away from wanting to oversee tenants and toilets. Most economists are predicting a rise in available inventory by late 2021 or early 2022. One thing we know for sure, the summer of 2021 will be a great time to be a seller! QCBN

By Leslie Guiley

Leslie Guiley is chief operating officer at Better Homes and Gardens Real Estate | BloomTree Realty, which includes BHGRE Commercial and she is an area ambassador with Inman News.