The Housing Market in 20211/1/2021
As we end the 2020 calendar year, we know one thing for sure, the housing market was booming! It’s been a seller’s market for years, and 2020 has been no different. Home prices have been accelerating fast due to high levels of pre-approved buyers and low levels of inventory.
During the COVID-19 shut down, Realtors were prohibited from showing homes. The market was put into a 6-week halt. This 6-week shut down played a tremendous role in the 2020 market boom and here’s why. When the real estate market shut down, more and more buyers got pre-approved and entered into the housing market. At this point, these buyers could not physically view homes in person, but were prepared and ready for when they were able to. When the market opened back up, it was like releasing the flood gates of pre-approved buyers. It was common for a buyer to compete against 5, 6, or even 7 other offers on a single listing. Buyers pulled out all the “tricks” in the book to win over the sellers. Acceleration clauses, appraisal guarantees and free occupancy were all common terms on a 2020 purchase agreement.
In 2021, I foresee the market balancing out. Buyers are fed up with constantly competing against other offers and are leaving the market altogether. They are making the decision to put their home search on hold. As a result, there will be fewer pre-approved buyers in the market. With fewer buyers, there will be fewer competing offers. Due to basic supply and demand, if there’s not as many buyers to drive up prices, prices will begin to plateau. I think as 2021 takes off, we’ll see homes selling at asking price, not over the asking price, like 2020.
I don’t foresee a market crash. Interest rates are still record low and there’s still a high demand for housing. The pandemic has forced people to spend more time at home and because of this, we’re seeing people needing or wanting an upgrade. Needing more space is common, needing to relocate for better Wi-Fi connections is common too. This new way of life is a direct reflection of the demand in the housing market.
All in all, demand is there and interest rates are low; I’m preparing my team for a balanced market in 2021.