If you’ve been a buyer trying to find a home and get your offer accepted, you’re probably tired of hearing the term “Supply and Demand”. But that is why you’re having a difficult time being up against multiple offers, including cash buyers. Some buyers have given up and are staying put in their current place, and some renters are signing a new lease.
Here is the Atlantic’s take on this crazy Seller’s Market:
“Pick a housing statistic at random, and it’s probably setting an all-time record. Home prices: record high. Inventory: record low. Percentage of homes selling above asking price: record high. Average time on market: record low.
Part of the issue comes amid an ongoing shortage of housing. Housing material costs are increasing and labor shortages are noted. A study found the US is coping with a deficit of about 2 million single-family homes. That statistic alone might give you an idea of why you might be ready to throw in the towel regarding finding a home right now.
Will Current Low Mortgage Rates Start Going Up?
I remember when we purchased our first house. We didn’t blink an eye at mortgage interest rates of 10.5%! But the price of our first home was $18,300! Can you imagine?
Throughout my real estate career, which began in 1983, a drop from double digits to 8.5% created another Seller’s Market. The same thing happened back then. Some buyers just couldn’t take losing out on offers and gave up.
However, today’s Seller’s Market is very different. When interest rates dropped to 8.5%, a buyer might have been up against one to five other offers. Not 10, 20, 30+. If anyone offered above asking price, it might have been $1,000-$10,000, and those upper amounts were rare. Even just a full-price offer was good back then. I’ve heard of today's buyers offering more than $100,000 over the asking price.
The Seller’s Market of years past wasn't as bad as it is today. Buyers weren’t making offers As-is or forfeiting a home inspection. They weren’t paying the difference between a low appraisal vs. the contract price. They weren’t paying non-refundable earnest money deposits. They weren’t letting sellers continue to live in the house for long lengths of time for free! These are just some of the offers we’re seeing today that didn’t happen with prior Seller’s Markets.
It is predicted by the Mortgage Bankers Association that today’s low rates will start rising as follows:
2021: rates should close out the year at around 3.5%
2022: rates will increase to 4.2%
2020 ended with rates around 2.8%
These rates are still low, and with continued low inventory I’m not sure we’ll see much of a change in the market.
What Will Happen to Home Prices?
Our current market is pushing out first-time homebuyers, which will create an interesting chain reaction. Who is going to be able to afford the lower-priced homes so those homeowners can move up to the next level, and so on?
Some buyers are hoping that this scenario will require the price of homes to decrease. But predictions are that they will continue to rise.
Inventory will continue to remain low. Some builders stopped building again because of increased material prices and a lack of work crews.
This brings us back to Supply and Demand. If inventory can’t catch up to buyer interest, prices will continue to rise. Add that to the fact that Scottsdale and surrounding Phoenix areas continue to grow in population, creating a continuous supply of high home buyer demand.
Home demand might have leveled off in some areas, but rest assured that Scottsdale real estate prices, and surrounding areas like Cave Creek and Carefree, will continue increasing. With that knowledge, you might want to keep trying to buy while rates are still low.
Will Inventory Continue to be Low?
I’ve mentioned the reasons for low new construction inventory already, and there doesn’t appear to be any kind of quick fix for this. Since the real estate bubble burst, new construction has been slow.
What I can’t put my finger on is why homes on the market have decreased. I understand that someone looking to upgrade will have to pay current high prices, but they will also get a high price for their home.
However, this might require them to get a much higher than desired mortgage and payment. Many homeowners refinanced to low rates, so unless they really have to sell, those homeowners might be hunkering down in their current places.
With these low rates, some people have paid off their mortgages and don’t want to have to get another one. So unless they need a bigger house, wish to downsize, or are moving to a different area, many homeowners without a current mortgage are also staying put.
Although the Covid pandemic practically stopped home sales for a moment, once the shock was over and we all learned how to show a home during a pandemic, the buyers were out in droves. I remember speaking over the phone to a nice lady who wanted to make a low offer on a Scottsdale home for sale. She assumed because of Covid that prices would drop.
I had to tell her that wasn’t going to happen. It was a friendly conversation but I don’t think she believed me. She said if prices weren’t going to drop then she would wait until they do. I told her she might have to wait for a long time. I think she realizes now that I was correct.
Will New Construction Ever Catch Up?
The Urban Land Institute is stating that we should be seeing increases in new construction. That is a good thing, but with the high cost of materials, many buyers won’t be able to afford new construction. Predictions are that we’ll be seeing over a million new houses a year in 2022 and 2023.
There seems to be a lot of new construction in Scottsdale real estate, from condos to single-family homes. The bad news is that they are not priced for first-time buyers. There has been a glut of affordable new construction for many years.
Are You Planning on Buying and/or Selling in the Coming Year?
If you think you can’t buy a place because you have to sell and close first, which will make it difficult to make an offer that will win with that kind of contingency, I have your back. Knock financing can help with that, and I am a Knock Certified Agent. Check out the video and call me with any further questions.
If you’re a buyer that isn’t sure what you can afford, I can help you with that. You can get pre-qualified at no cost. If you can’t qualify for a mortgage right now, the loan officer can tell you what you need to do so you can qualify as quickly as possible. I have worked with buyers that straightened up their credit situation in less than a year and come back to me ready to buy.
Call me at 480-906-1500Posted by Judy Orr on