The Current Market for Buyers Spring/Summer 2021

By James Vaughn

“Ultimately, your situation is unique, and only you can decide when it is the right time to buy a home.”

It is no secret that the current housing market is a challenging one for buyers. Bidding wars abound, prices seem to go up faster than incomes and lending practices can accommodate, and buyers hungry for a home to call their own are often priced out of the market. Some may despair that now is not a good time to buy, and others may experience an acute case of Fear of Missing Out (FOMO) and jump the gun too quickly. We are here to help you navigate a stressful process and determine if now is the right time to jump into the housing market.

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 situation translates to increased competition for would-be buyers and means that bidding wars have become more frequent and intense, meaning there is a greater likelihood that you may get outbid on that dream home or fail to qualify for a sufficient loan.

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. While it may seem at first glance that this situation would disadvantage would-be buyers and herald impending doom for the housing market, there is also a strong chance that it signifies a market with healthy fundamentals that will merely even out in the long term as inventories catch up to demand. Potential buyers waiting to buy solely on the premise that a crash might be coming should recognize that the situation is 2021 is not the same as in 2008.

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. Although 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 remain 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: Buyers should also think about influences to the housing market that have nothing directly to do with housing. For example, the pandemic created supply-chain blockages that increased the prices on building supplies for homes. Therefore, the prices of newly constructed houses have risen, as well as the cost to remodel. While an older home may present opportunities for sweat equity investments, buyers should also consider whether these renovations would be necessary in the short term, or if they could wait until a potential drop in the price of commodities.

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. Buyers should also consider the effects of urban flight from the Washington DC region as many government employees anticipate increased tele-work going forward. Areas that used to be cheap for those who do not have a regular commute into the metro area have seen housing prices rise over the last year.

Ultimately, your situation is unique, and only you can decide when it is the right time to buy a 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.