What is behind this crazy, hot market and when we will see relief?
There are so many factors at play right now. Inventory shortage, first time buyer expectations (the smaller homes that were once palatable to first time home buyers, are now less desirable than homes with more space, inside and out. The pandemic has much to do with this since so many are working and schooling from home).
Then there’s the effect the pandemic had on the entire spectrum of homeowners
- The chance to live where they want and work from home
- Desire to have more room, inside and out, if working and socializing from home more.
Add to all that, historically low interest rates and the cost of new construction making higher resale prices look less daunting, and you have a formula for what we are seeing.
I also think some of it is a natural progression for mid to higher range homes. Early on in the recovery, entry level homes jumped dramatically but higher priced homes did not. Mostly because there were not as many “move up” buyers. That has changed. Those mid to high price range homes have become more desirable and more affordable due the equity built up in entry level homes and the low rates making the payments for higher level loans less impactful than expected.
Out of state buyers are significantly impacting our market as well. Many are coming from more expensive markets and have considerable cash, and a comfort level for higher mortgage payments, giving them significant buying power and causing escalation in bidding competitions. The rumors of bids of $100K above asking is based in truth. Not every home is seeing that, though most are getting multiple offers above asking.
Some relief, or at least lessening of pace of multiple offers and appreciation, may come due to the following likely occurrences:
- Mortgage rates rise
- Homeowners currently participating in forbearance decide to sell as their forbearance ends
- The mass movement of people shifting to new locations due to the new ‘work from anywhere” paradigm slows.
2022 will most likely be when we see the impact of these factors, unless interest rates climb rapidly in 2021.
For many, the best opportunity is new construction. Most builders are not creating bidding competitions. The best tools for finding the right new construction home is letting your Realtor use their relationships to get you the best chance of getting a lot as they are released. One word of caution: with the pace at which houses are being built, making sure yours doesn't fall victim to serious mistakes is to use a professional inspector who does multiple inspections through out the build. That is why I provide FREE 4 stage inspections for my clients who buy a new construction home. It's tough for buyers to part with another $1,300 or so for these and I know the importance of getting them. It is one of the way I look out for my clients. It has paid serious dividends for my buyers. Everything from missed insulation, mold issues, improperly installed roof components and a host of other issues have been found and corrected thanks to these inspections.
As always, the common sense practices that have served my clients well over the years hold even more value in hectic markets like we see now.
Be sure to call me before heading into any sales office at a new development. Having me registered as your agent must be done at the first visit.