Mania is Rampant in the Real Estate Market!
It’s Wild Out There!
Homes sell in record time as inventories decline.
According to an article on CNN Business, a home in a Washington DC suburb, had 88 offers from Thursday to Sunday evening. The asking price had been $275,000. 76 of theses offers were all cash. The article pointed out that 15 of them were sight unseen offers.
This property was a 4 bedroom, 1,800 square-foot home that was considered a “fixer-upper”. The home sold for $460,000 cash. That represents nearly a 70% increase from the asking price. The purchaser was an investor who will like remodel and sell quickly.
The available homes for sale is now at a record low. This shortage increases competition and pushes home prices ever higher in many parts of the country. With no sign of weakening demand, it’s hard to guess when or if the availability will increase and prices might begin to be more affordable.
Why are home prices rising?
Just over a year ago, home sales declined dramatically when Covid-19 took hold in the US, with sales dropping by about 40%. Residential sales bounced back last May but inventory did not. and that is true up to now. Inventories are still shrinking and the shortage is causing prices to skyrocket!
The National Association of Realtors claim that average prices are up 16% nationally, and that’s on top of a 21% increase in the West alone last year. Inventories are down an additional 30% from a year ago.
When will this END?
Experts are saying that mortgage rates will continue to move up and the current fever will cool during the last quarter of 2021. Predictions are that homes will remain on the market longer and inventory will begin to accumulate. Home builders are feverishly trying to build more new homes and that will also create more inventory. None of this will cause any sizeable lowering of prices. Prices were up 10.4% in 2020 compared with the year before. It seems metro areas in the West and Northwest (Phoenix, Seattle and San Diego) seeing the largest increases.
Another factor is that those who might sell in a more “normal” market are sitting tight. This seems to be because they understand the pressure of finding their next home and then being able to afford it even if you can find it. Also, the many refi’s have lowered payments and shortened terms so that moving now is not advantageous. According to a well known Maryland Real Estate broker, some people want to think that this is coronavirus-related. While there are people who don’t want to sell because of the pandemic, we are now truly in a housing crisis that has been building for years. Unfortunately when you have 5, 10, 15, 25 offers on a house, things become skewed. The only buyers that get homes are buyers that are extremely financially secure and buyers who are willing to pay a premium price.
Buy Now or Wait??
Surprisingly, as inventory shrank this past year, the number of buyers increased. It seems that urbanites, first time buyers and Millennials are all joining the buyer pool–looking for more space and escaping big cities. It may not make sense to wait if you are ready to buy now. With interest rates climbing and no sign of prices dropping anytime soon. Things could be worse this time next year in terms of real cost.
Conclusion Anyone?
If prices stay steady or keep rising and interest rates continue to rise (as experts believe) and there are going to be more buyers than sellers. That means that now might be the last best time to buy and lock in the best rates.
If you are fortunate to find the home you want and you can afford it, that home is not going to be around for long. When you’re comfortable you can afford it, you should proceed. Interest rates will go up. That is a certainty.