If you’re like most of us in the real estate industry, we’ve been hearing one question a lot: when will the market crash again? While we can’t answer your question in a straightforward manner yet, the current data does cue is on what the fall 2021 real estate market looks like.
A hot summer for the housing market makes many wonder whether the housing market will cool off anytime this fall. But in an era of already low inventory, the COVID-19 pandemic fueled the demand for housing even further as more people worked from home and spent time indoors. As shifts in the market coincide with the opening of businesses, more working professionals are returning to the office and students head back to school, there’s a sense of hope in the air that the housing supply is showing signs of picking back up.
Existing home sales in the U.S. have decreased
Don’t get us wrong, the market is still hot. However, the National Association of Realtors released its data from August 2021, which showed that the housing market declined 2.0% in August 2021 from July 2021. And compared to a year prior (August 2020), sales of existing homes also fell 1.5%. While those percentages might seem small, they’re still a decrease that the housing market has needed to see for quite some time to normalize.
Prices will continue to rise, just not as substantial of a rate
NAR also made note of the consistent rise in prices as August 2021 is the 114th consecutive month of year-over-year gains. But take a look at this year’s data:
- In April 2021, home prices had an annual rise in home prices of 17.2%.
- In August 2021, home prices had an annual rise of 8.6%
- By December 2021, we can predict the annual rise will follow this trend to fall below that 8% mark.
It’s still noticeable that the level of demand out weights the available inventory, but this trend in percentage drops is a sigh of relief for potential buyers. On top of that, fall is one of the slowest times of year to buy a house, making even more good news for potential buyers. Forbes predicts that we will see the typical “cooling-off period in the fall” that the market didn’t see in 2020.
More inventory is a relief to potential homebuyers
While existing home sales declined, housing inventory has improved slightly. In January of 2021, there were 1.9 months of inventory on the market. Move to June, and the housing inventory for sale jumped to 2.6 months. Even though this is nowhere near the inventory margin we need in order to see a balanced market, it’s an improvement. This small increase could also decrease the rush associated with buying a home in today’s market. Buyers might actually have some time to consider the best option, rather than placing an offer on seven homes just to see which one has the the best shot of sticking.
With a more balanced market comes less high-risk behavior from buyers. All of the bidding wars and offers over listing price may be less of a regular occurrence. On top of that, many buyers have made other high-risk compromises in order to make a purchase in this climate. There are a few wild scenarios that put the risk into perspective including reports of homes selling $115,000 over asking price, waiving the inspection, forgoing contingencies and even purchasing sight unseen. A market with more inventory could mean less of this risky, compromising behavior and a return to normal in the fall.
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