The New Normal: A Strong Housing Market Expected to Continue into 2021
2020 has given us a gut punch like no other that most of us have ever experienced. The housing bubble bursting was bad for real estate, but I was able to survive it like I've survived several recessions in my long history as a licensed real estate agent. The strong really do survive!
I received a phone call this past Spring when Covid was getting widespread publicity and government mandates were starting. It was a woman wanting to see a house for sale that was either my listing or something that showed up on my website.
She questioned the price and stated that because of the pandemic and a pending recession, home prices will be going down. I tried to explain to her that the only time (in our lifetime) that prices went down was during the Great Recession of 2008. Prices weren't affected in the other recessions I was working in, according to recent statistics.
I explained this to her but she wouldn't believe me. I told her if she wanted to wait for prices to go down she might be waiting a long time. If she needed a house now, then she needs to jump into the market. I didn't tell her that after losing an offer or more, she'll learn what today's Seller's Market really is.
Is this Seller's Market Our New Normal?
Just like this woman, many in and out of the real estate business were predicting doom and gloom. The only doom and gloom are for buyers that need to purchase a place and can't get their offers accepted.
Of course, the problem with some buyers is that they're looking at the top of their affordability price range, and they're getting beat out by other buyers that can afford to bid $25,000 and higher on a house. FHA and VA buyers are having an especially difficult time getting their offers accepted when they're up against 20%+ down conventional and even cash buyers.
Some agents are unhappy when their FHA or VA buyers don't seem to have a chance. They feel that if their buyer has been pre-qualified, it shouldn't matter how much they put down.
Unfortunately, in a Seller's Market, the sellers can be as picky and choosy as they want. On the recent sale of our house in IL, we had a buyer that had 70% down. We countered her offer, but she couldn't go any higher. So then we chose a buyer with 20% down that was already pre-approved. She was the highest of 18+ offers.
My son will be purchasing a house soon and he's going to learn the reality of today's market. I can only hope that things might be a little slower in the winter, but I don't see it.
Fannie Mae Senior VP and Chief Economist Doug Duncan feels that prices will keep going up because of low inventory and interest rates will continue to stay low. We just bought a house and this is the lowest rate I've ever had on a mortgage. However, it is the most expensive property we've ever bought.
We are Still in a Seller's Market
I don't think I remember such a long Seller's Market since I got my real estate license in 1983. How long can this really last?
A Seller's Market is caused when there are fewer homes on the market than there are ready, willing, and able buyers. I remember a Seller's Market where weary first-time buyers gave up and signed another lease with their landlords since they couldn't compete in multiple offer situations.
The National Association of Realtors states that we haven't seen such low inventory since 1982. 1.47 million homes for sale might sound like a lot, but it is still 19.2% less than last year.
National days on market (your area might be different) is 21 days according to NAR Chief Economist Lawrence Yun. That is the shortest market time NAR has recorded.
When we recently purchased our new home, if we weren't able to view a home the day it hit the market, it was gone before we could make an appointment for the next day. We sold two properties and they both sold in less than 2 days.
Our house in IL only took 1.5 days because we allowed some buyers and their agents in that begged to view it as they weren't able to the day before (where we had over 50 people - in one day). We had 18 offers with more coming in after we accepted one.
Our Scottsdale townhouse sold the first day on the market with about 8 offers, and again, more offers coming in after we accepted one. Both properties got over the list price and they both appraised.
Those two sales are an example of why prices continue to rise. It is simple supply and demand. Even though we have an increase in new construction, it isn't enough to satisfy the number of potential home buyers.
There were quite a few Scottsdale homes that were under construction. We didn't want to wait to have a home built, so we didn't even consider those. We prefer to buy in a more established area and community.
Some speculated that this Seller's Market was a product of Covid 19. People were unhappy about being stuck in their current living space. In many cases, they felt their current home or condo or townhouse was just too small. They now needed office space, workout space, etc.
But the truth is, inventory was low in 2019 and we were seeing multiple offers before the pandemic hit. 2019 was our personal best year yet in the business.
Sellers: this is your chance to get top dollar for your current property. With that said, you'll also be paying more for your next place. However, you might get a lower interest rate than you have now, especially if you never refinanced. Call me for a free Comparative Market Analysis to see where you stand.
Buyers: you need to prepare yourself that you're probably not going to get a deal in this market. You don't have time to think about making a purchase, which can be difficult for first-time buyers. You can't expect to win a bidding war with a lowball offer. Your offer needs to be the best, and getting pre-approved vs. pre-qualified can put you in the best position to have your offer accepted. That means you've been fully vetted and are just waiting for a property and for it be appraised - as close to a cash offer as you can get with needing financing. Call me to get referred to a great lender.
Now here's the kicker. You'd think with such low inventory, the entire market should have declined. But that's not what has happened - we are 21% over last year's sales figures!
Sellers Still Need to Price Their Homes Right
Even in a Seller's Market, we are seeing Scottsdale homes for sale that are sitting longer than the average market time. When a home sits too long, most sellers start taking price reductions.
In such a quick market, a home sitting on the market too long can become a stale listing and buyers might not be interested in viewing it because they think something is wrong with it. Even if they can see that price reductions have been made, they might not want to deal with what they perceive to be an unrealistic seller.
The home we purchased was a little rough. My husband can fix almost anything, so that didn't bother us too much (although he's been complaining ever since we moved in). So it sat on the market for longer than some other homes we saw, which worked well for us. It had a price reduction before we made our offer, and we weren't up against any other buyers.
It showed well, but with our experience, we could see what was needed. Then there were more repairs we weren't expecting once we moved in.
If you want a quick sale at top dollar, or for even more than list price, you need to have the best home currently on the market and in your price range. We did a lot of updates on our house in IL and decluttered and cleaned before listing it. We were rewarded by a quick sale of $25,000 higher than the asking price.
We spiffed up our Scottsdale townhouse up to a point. We already had some updates such as a new heat pump, new hot water tank, newer washer and dryer, and all new stainless steel kitchen appliances. We didn't paint, update bathrooms, or anything else, but it was clean.
We had a popular floor plan with no other similar listings in our complex. I think the only townhomes listed were one-bedroom units. Ours was 2 bedrooms with a loft. We also were the only 2+ bedroom unit in our price range in Scottsdale with a garage - and a 2-car garage to boot.
So just because it's a Seller's Market, it doesn't mean you can ask whatever you want and not spiff your place up and expect a quick sale with multiple offers. Give me a call so I can do a quick walk-through and give you ideas to get your house "showing ready" with the least amount of expense to you.
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I've had sellers follow all of my recommendations and they had quick sales without it being a Seller's Market. I've also had sellers love their house so much after following my advice that they decided to stay put! Call me at 480-877-1549.