The Current Market for Sellers Spring/Summer 2021
It’s no secret that the current real estate market is hot- piping hot. Some have compared the current market to the pre-2008 bubble- that burst left many homeowners underwater on their mortgages and caused some to lose their homes. While it may be easy to think about 2021 in terms of 2008, homeowners looking to sell this year should make sure they are doing so for the right reason, and Fear of Missing Out (FOMO) is not typically one of them. We’ll take a look at the current market and recommend some paths forward.
1) Inventory is at historic lows: This means that the number of available housing units nationwide relative to the number of buyers is quite low. This is good news if you are looking to sell your home quickly as it means you are more likely to receive many offers, and perhaps even sell your home for more than it was listed for. However, if you plan to immediately buy another home, you’ll find yourself on the other end of the stick.
2) Home prices continue to rise: In November 2020, average home prices had grown 15% from one year prior- falling within the longest period of economic expansion in the country’s history. As a home seller, this should work to your benefit, especially if you have owned your home for more than a few years and made renovations. While indefinite value gains at this rate are unlikely, another market crash is also not a given, so don’t worry if now is not the right time for you to sell your home.
3) Market crash?: While no one has a crystal ball and can say for certain if another crash is looming on the horizon, we can look at the current situation and compare it to the time before 2008- while a correction or plateau may be coming, a full-scale crash is not a given. First, the drivers are different this time around. While the housing market crash in 2008 was fueled by subpar lending standards, these standards remain tighter now even as sellers are hesitant due to ongoing covid restrictions, and interest rates remain at historic lows. Thus, the current price trends are likely driven more by limited inventory, high demand, and yes, buyer FOMO as well. Most indicators suggest that interest rates should remain low for a while- if other advanced industrial economies offer any insight into our future, low interest rates may become a more permanent fixture. These factors are more suggestive of a coming plateau, or perhaps moderate price correction, than a 2008-style recession.
4) Broader economy: Sellers should also think about influences to the housing market that have nothing directly to do with housing. Before the pandemic, unemployment rates were at their lowest levels since the 1960s. Government-imposed lockdown restrictions created an artificial decline in economic activity and increase in unemployment. While the pandemic may have accelerated existing trends in the way we work, shop, and live, the underlying fundamentals of the economy remain the same. There is actually much reason to expect that the 2020s will be a decade where a labor shortage is the dominant problem as Baby Boomers continue to retire and emerging industries require talented labor- a good sign in the long term for those looking to receive multiple offers on their home.
5) Local economy: It’s no secret that Virginia, particularly northern Virginia, has a heavy government and military presence. The jobs that this presence creates remain generally stable despite economic downturns. Therefore, even if the broader economy sees an economic correction or downturn, the local housing market may be buffered against the worst effects.
Ultimately, your situation is unique, and only you can decide when it is the right time to sell your home. At Sands & Associates, we are here to help guide you through that decision and provide insight into the myriad factors that impact your decision-making process.
Author: James Vaughn