The New Normal: A Strong Housing Market Expected to Continue into 2021
Updated: Nov 3, 2020
“2020 will be known for a lot of things, and a record-breaking year for real estate will certainly be one of its more unexpected legacies,” prominent economist Daryl Fairweather said.1 And he’s right: most of us would have expected the housing market to suffer from circumstances like a once-in-a-hundred-years pandemic and historic inventory shortages.
But, rather than a slowdown, we are continuing to experience a surprisingly robust real estate market across the country. And experts estimate that these conditions are likely to last well into the new year. Fannie Mae Senior VP and Chief Economist Doug Duncan predicts that existing home sales will ultimately “be up a percent or more in 2021.” He believes home prices will continue to rise due to limited inventory, but he is confident the Federal Reserve will keep interest rates low into the future, which will be “very good for households.”2
Market conditions like fewer available listings, changing criteria for desired homes, and record-low mortgage rates are changing the way people buy and sell homes, most likely in a lasting way. But this sustained activity, even in the uncertainty that is 2020, proves that our country still views real estate as a sound investment. The only question now is how you can take advantage of the housing market’s “new normal.”
FEWER LISTINGS EQUALS A SELLER’S MARKET
Inventory, meaning the number of homes for sale, is at a record low across the country. The National Association of Realtors (NAR) reports there are fewer homes on the market today than the association has seen in data going all the way back to 1982.3 Currently, the total housing inventory is about 1.47 million units, which is a decline of 19.2% from one year ago.4
Experts do predict some relief on the horizon. MarketWatch had previously anticipated housing starts would occur at a pace of 1.45 million and building permits would come in at a pace of 1.52 million.5 But it turns out that the market exceeded expectations: compared with last year, housing starts are up 11% and permitting for new homes occurred at a seasonally-adjusted annual rate of 1.55 million. That represents a 5% increase from August and an 8% increase from a year ago.
For now, the fact that there are fewer listings creates an advantageous housing market for sellers. There are several reasons why.
For one, buyers have to act fast to snap up available homes. As a result, most properties that come on the market stay for an average of just 21 days before they are sold.6 “That is the fastest ever recorded in our monthly series,” says NAR Chief Economist Lawrence Yun.
Another benefit is that sellers are enjoying higher net returns on their listings. This is thanks to the tough competition for homes, which often results in bidding wars between buyers. Nationwide, the median home price in September rose to $311,800. That translates to about $40,000 (15%) more than just a year ago.7
This seller’s market is not simply a product of the pandemic. In fact, in the country’s top 100 metro markets, inventory has been dwindling since the first quarter of 2020.8 This means that even with increased construction, buyers can’t simply wait for things to go back to normal before reentering the market. Rather, all signs indicate that this is the new normal.
What It Means for Homeowners:
These higher home prices show that buyers are willing to spend more on a home right now than they did last year. So, if there ever were a time to list for top dollar—and expect to receive asking price quickly—that time is now. Ask us for a free consultation of your home’s value today.
What It Means for Homebuyers:
Due to low inventory, buyers could easily find themselves in a bidding war. Time is of the essence in a seller’s market, so you’ll need to get your financing in order and be preapproved for a loan before you begin your home search. We can connect you with a trusted mortgage professional to get you started.
BUYERS BENEFIT FROM LOW MORTGAGE RATES AND A BIGGER PLAYING FIELD
Don’t worry, homebuyers. This “new normal” of real estate has benef