The housing market has been gaining strength in the last few years — particularly during the COVID-19 pandemic. Home values soared, buyer demand jumped, and mortgage rates hit historic lows. And ultimately, it’s made housing one of the few bright spots during an otherwise difficult time.
But the housing market is always in flux, and real estate trends come and go. Throw in that this industry is highly localized, with different conditions in every city, state, and metro area, and you can’t bet on things staying stagnant for long.
House prices are influenced by a number of factors, including local buyer demand and the amount of housing supply that’s available for purchase. Generally speaking, high demand and low supply cause housing prices to rise.
Mortgage rates can also play a role since they impact demand. When rates are lower, there tends to be more interest in buying homes. When rates rise, demand might wane a bit.
At the national level, home prices have been rising for some time. As of the end of 2020, the median home price was just under $347,000. Home prices jumped 11% across 2020 alone.
In early 2021, mortgage rates hovered around all-time lows, according to Freddie Mac. The average rate on a 30-year, fixed-rate mortgage was just 2.74% in January, up from 3.62% the year before and 4.76% a decade prior.
As far as today’s inventory goes, supply has been very low in recent years, and the coronavirus pandemic only worsened things. With sellers leery about having strangers in their homes — not to mention loads of economic uncertainty — the number of for-sale listings plummeted in 2020, at one point reaching its lowest level ever recorded. Listings have since recovered slightly but still remain fairly low. It’s possible widespread vaccinations will help loosen supply constraints and get sellers back on the market, but, of course, only time will tell.
Fortunately, it appears there may be a light at the end of the tunnel — at least, a very distant one. According to a Zillow survey of over 100 economists, 43% expect housing inventory to grow in the back half of 2021. Another 26% predict early 2022. Data from Realtor.com shows new listings were up 40% last month. While active inventory is still well below last year’s numbers, it’s a sign that sellers are getting off the sidelines and more supply is in the future.
Until that inventory hits, the market is going to continue its competitive streak. Nearly two-thirds of buyers faced a bidding war last month. And in some areas, supply is so low that buyers are getting 80-plus offers in just a few days’ time. To win, buyers are having to waive contingencies, lease back the home (often for free), and many times, pay in all cash, just to get noticed.
Naturally, this high competition is driving prices upward. The latest S&P CoreLogic Case-Shiller Home Price Index has prices 12% higher than they were one year ago as of February 2021. It marks the ninth-straight month of price increases and the highest gain seen since February 2006.
The real estate market changes quickly. Contact us to catch up on the latest real estate trends and happenings.
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