As we know, and stated in Steven Thomas’s Reports On Housing, listings started this year with the lowest level of homes since tracking began, at 2,633 homes, 17% fewer than in 2013. This paired with mortgage rates reaching a record low during the first week of January at 2.65%, caused inventory to shed an additional 11%, dropping to 2,349. Now with the Expected Market Time dropping from 42 days at the start of the year to 23 days today, this Hot Seller’s Market shows signs of sticking around a while longer.
Now experts are expecting a robust second half of 2021, just a few months away, the start of the next “Roaring ’20s.” Mortgage rates are projected to increase anywhere between 3.5% to 4%, depending on the economic boom size. That is precisely where they were bouncing around before the pandemic, a much more normal range. These higher rates will be the catalyst to the market shift, and the market will decelerate.
According to The New York Times article, Where Have All the Houses Gone, there are 5 contributing factors to the lack of inventory.
- Baby Boomers are currently the majority of homeowners. As they are at higher risk for COVID, they have been reluctant to move or downsize during the pandemic.
- The natural movement from a starter home to a forever home to a nursing home has been disrupted. It’s not fun to think about, but it’s part of life! Very few people are moving into nursing homes right now. Who would commit to a “forever home” and free up their “starter home” when it’s unclear what remote work will look like in six months?
- Foreclosures and forced home sales aren’t occurring. More than four million homeowners with government-backed loans were in mortgage forbearance during the pandemic’s peak. That government policy has been a lifeline for many families who’ve lost income and means that some potential foreclosures and forced home sales didn’t happen.
- Fewer homes are being built due to political reasons and local restrictions. Additionally, we are still recovering from the last crash that decimated the residential construction industry.
- Low-interest rates have incentivized many homeowners to stay in their homes longer than they would have in the past. People are holding onto their cheap interest rates for as long as possible. The low rates enabled many homeowners who bought a new home not to sell their previous one but instead treat it as an investment property.
AN IMPORTANT NOTE
It will still be a Hot Seller’s Market. This is NOT a shift to a Buyer’s Market. This is a shift from the housing market that is currently nuts, appreciating at about 1% per month, to a regular Hot Seller’s Market with normal, 4% to 5% appreciation per year. Sellers who overprice will sit and languish on the market.
For a copy of Steven Thomas’s Reports On Housing or answers to any of your real estate questions contact us today!