What to Expect as We Close the Spring 2021 Buying Market
Earlier this year in March, one fixer-upper home listed in Washington D.C. racked up 76 all cash offers in a matter of a couple days. What in the … ?
Since COVID initially hit the housing market in 2020, the industry has bounced back with vigor. We’ve steadily seen housing prices climb, so it’s not surprising that the spring 2021 buying market has been, what some might say, off the chain. Spring is the busiest home buying season combined with the fact that there are an insanely low number of homes on the market, the 2021 real estate market is a hot commodity. Real estate agents and brokers need to be at the top of their game and be prepared for the rest that this season’s real estate market has to offer. You know we have your best interest in mind, so keep reading, because our team is here to help prepare you and your team.
Home prices will continue to rise
This doesn’t come as a shock to you after discussing 76 cash offers, does it? We didn’t think so — home prices will continue to climb as we end out April 2021. The market has a trio of conditions that skyrockets prices.
- Buyers want to take advantage of historically low mortgage rates.
- There is an incredibly low housing inventory partially due to the pandemic.
- There is a large population of prospective homebuyers looking to buy rather than rent.
Millennials make up the largest home-buying population
In 2020, 4.7 million millennials turned 30 and another 4.8 million will turn 30 this year, according to Realtor. This huge number of millennials has the financial opportunity to purchase a home finally achieving the American Dream — and if there’s anything we had all hoped to accomplish by 30, it was to finally have your s**t together. Even with rising prices and limited inventory, this group of young homeowners is looking for inventory, which will keep the current buying cycle moving forward.
COVID flight out of metro areas
One thing to note is that working conditions remain flexible. A large number of people continue to work from home this spring, and may continue to do so even further down the road. What does this mean for us in the real estate industry? People are moving out of larger metro areas where jobs once confined them to a specific location — for example, a home buyer who could not afford a home in San Francisco can likely purchase a home in Sacramento, or even out of state (Hello, Texas and Idaho!). Since remote workers can work from basically anywhere, this flexibility brings an influx of new buyers into the market space.
Expect there to be bidding wars
It’s war out there, ladies and gentlemen. For the first time in history, Matt B. Vigh, co-owner of Prospective Boomerang, states that there are more licensed agents than there are active listings. Not only are agents competing for a listing, but soon they’ll be competing for a job. This spring 2021 buying market hasn’t been an easy one for realtors, but unfortunately, that’s not likely to improve. As an agent, you need to be able to win a bidding war.
Prepare your client for what to expect
Mentally prepare your client for what to expect before even showing them a listing. The more prepared they are, the quicker you both can come to an agreement and put in an offer.
- Offers may, more often than not, be well above asking price.
- How flexible is the down payment? Cash offers and high-percentage down payments are more attractive, as well as secure, than the lower percentages required by something like an FHA or VA loan.
- Together with your client, set a maximum price that you feel comfortable offering. Essentially, we have to do the exact opposite of lowballing a seller. Hit the selling agent with a higher price to even be competitive.
Offer something that other agents cannot
Set yourself apart from the rest of the field by being faster and more efficient in your job. And that goes for both acquiring a new client, and having an offer accepted. What can you offer that others can’t? Utilize the emerging real estate technology to your advantage. Cloud-based back-office and accounting software and other apps let you write a contract, send for signatures, transfer money, and more from the property address itself, or anywhere for that matter. Save time by sorting your offer out on the go as opposed to back in the office. Think about it this way — how many other offers were sent in during the time it takes you to drive back to your office computer? Now that’s what we don’t want to happen.
New construction sales `
The Mortgage Bankers Association released findings in February 2021 that new home purchase mortgage applications had risen by nearly 19% over the past year. With low home inventory to choose from and a preference for larger single family homes not found in city areas, what is another avenue for a home buyer? New construction.
However, even new construction isn’t immune to these rising prices. The winter months inevitably slow down the construction process due to seasonal storms and even snow depending on the regional location. These storms slow down the construction process, extend the start date for many home builders and the delay just adds to the struggle to keep up with the housing demand.
On top of weather delays, the U.S. has seen a massive increase in the price of lumber. The National Association of Home Builders reports a 180% increase in lumber prices costing an additional $24,000 to build a new home since last spring. Starting now and through the rest of the year, the price of new homes will also climb. The increase doesn’t leave buyers with many places to turn for more affordable options.