Home for Sale with Bidding War Sticker

What’s Up With This Market?

The market trends in the first month of 2021 shows that home buyers will face a competitive spring season as inventory remains low. The exploding demand has led buyers to desperately bid up the prices of available properties, sending home prices soaring. House prices in all the major local real estate markets continue to rise. The demand is really high, and the supply and inventory are deficient.

According to economists and market watchers, home values are growing at their fastest pace in a generation, and are showing no signs of slowing down in 2021. Buyers have to face more competition and act more quickly than usual to snag their dream home. Housing prices had already started rising before the pandemic arrived but the pandemic created a rapid acceleration in double-digits.

Another key finding is that the renter growth will be more than twice the pace of homeowner growth from 2020 to 2040. Between 2020 and 2040, there will be 9.3 million net new renter households, a 21 percent increase.

The main reason behind such an extreme pace of home price appreciation is the basic economic seesaw of supply and demand. The country needs far more units to meet demand but there has been a large and persistent shortfall in recent years. On top of that, the pandemic has really knocked down home builders’ ability to fill the housing supply as they are running out of land.

The housing market has already been running too short of previously owned homes. Buyers are scrambling to take advantage of plummeting mortgage rates that make the cost of buying a home much cheaper. The number of homes for sale has plummeted and remained down around 30 percent of what it has been in recent years — leaving the market with nearly twice the demand and two-thirds of the supply.

Both the inventory of homes and mortgage rates are now at their historic lows. The months’ supply of existing homes for sale has fallen to 1.9 months, the lowest level since the series began in 1999. With inventories this tight, it is unlikely that existing home sales can continue to rise at last year’s pace, which means there could be a little slowdown in existing sales throughout 2021. 

Want to discuss what this means to your personal investment portfolio? Reach out, let’s chat.

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