Most of us would have expected the housing market to suffer from circumstances like a once-in-a-hundred-years pandemic and historic inventory shortages. But, rather than a slowdown, we are continuing to experience a surprisingly robust real estate market across the country. And experts estimate that these conditions are likely to last well into the new year.
Market conditions like fewer available listings, changing criteria for desired homes, and record-low mortgage rates are changing the way people buy and sell homes, most likely in a lasting way. But this sustained activity, even in the uncertainty that is 2020, proves that our country still views real estate as a sound investment.
The only question now is how you can take advantage of the housing market’s “new normal.”
FEWER LISTINGS EQUALS A SELLER’S MARKET
Inventory (e.g., number of homes for sale) has been dwindling in the country’s top 100 metro markets since early 2020. It is currently about 1.47 million units, which is a decline of 19.2% from one year ago—and the lowest point since 1982.
Fewer listings creates an advantageous housing market for sellers right now because buyers have to act fast to snap up available homes. As a result, most properties only stay on the market for about 21 days before they are sold.
And thanks to tough competition for homes (often resulting in bidding wars between buyers), sellers are enjoying higher net returns on their listings. The nationwide median home price in September rose to $311,800, which translates to about $40,000 (15%) more than just a year ago.
LOW MORTGAGE RATES, BIGGER PLAYING FIELD BENEFIT BUYERS
People used to base their next home purchase on commute times and school districts. Now, thanks to the pandemic shifting the locus of jobs and work, they are free to consider how and where they truly want to live. Surveys show that quieter neighborhoods, home offices, updated kitchens, and access to the great outdoors are preferred.
The search for these criteria is driving residents out of densely populated metropolitan areas and into the suburbs, which opens more inventory possibilities than buyers could consider pre-pandemic.
Now that 30-year fixed-rate mortgage rates dropped to 2.81% in mid-October, buyers are afforded the opportunity to buy nearly $32,000 more home than they could one year ago. Similarly, a 15-year fixed-rate mortgage can be had for as low as 2.35% compared to 3.15% a year ago. So even though home prices are high now, it’s more affordable to buy a home now than it was last year.
RECORD-SETTING YEAR FOR HOME SALES IS JUST THE BEGINNING
Despite the seemingly adverse buyer conditions, 2020 experienced a 14-year high number of home sales, NAR reports. Existing-home sales (including single-family homes, townhomes, condominiums and co-ops) rose 9.4% across the nation in September to a seasonally adjusted annual rate of 6.54 million. That’s a 21% increase from a year ago!
All of the aforementioned factors indicate that the housing market is poised to remain strong as we head into the new year. And experts believe they could “buoy the housing market for years to come.”
REAL ESTATE IS A SAFE BET
Today’s housing market is competitive and strong, which makes it a sound investment for your future. If you’re considering buying or selling a home before the new year or in early 2021, contact me now to schedule a free consultation.
- Housing Wire
- National Association of Realtors
- Business Insider
- Wealth Advisor
- Washington Post
- National Association of Realtors
- Axios Media
With businesses starting to slowly open back up again in some parts of the country, it’s important to understand how housing can have a major impact on the recovery of the U.S. economy. As we’ve mentioned before, buying a home is a driving financial force in this process. Today, many analysts believe one of the first things we’ll be able to safely bring back is the home building sector, creating more jobs and impacting local neighborhoods in a big way. According to Robert Dietz in The Eye on Housing:
“The pace of new home sales will post significant declines during the second quarter due to the impacts of higher unemployment and shutdown effects of much of the U.S. economy, including elements of the real estate sector in certain markets. However, given the momentum housing construction held at the start of 2020, the housing industry will help lead the economy in the eventual recovery.”
The National Association of Home Builders (NAHB) notes the impact new construction can have on the job market:
“Building 1,000 average single-family homes creates 2,900 full-time jobs and generates $110.96 million in taxes and fees for all levels of government to support police, firefighters and schools, according to NAHB’s National Impact of Home Building and Remodeling report.”
These employment opportunities, along with the home purchase, drive the economy in a major way. The National Association of Realtors (NAR) recently shared a report that notes the full economic impact of home sales. This report summarizes:
“The total economic impact of real estate related industries on the state economy, as well as the expenditures that result from a single home sale, including aspects like home construction costs, real estate brokerage, mortgage lending and title insurance.”
Here’s the breakdown of how the average home sale boosts the economy:As noted above in the circle on the right, the impact is almost double when you purchase new construction, given the sheer number of workers it requires to design, build, equip, and finalize the sale of the home. The NAHB paints a clear picture of these roles:
“The NAHB model shows that job creation through housing is broad-based. Building new homes and apartments generates jobs in industries that produce lumber, concrete, lighting fixtures, heating equipment and other products that go into a home remodeling project. Other jobs are generated in the process of transporting, storing and selling these products.
Additional jobs are generated for professionals such as architects, engineers, real estate agents, lawyers and accountants who provide services to home builders, home buyers and remodelers.”
The same NAR report also breaks down the average economic impact by state:On an emotional level, what’s most important for today’s consumers to feel confident about is the safety component that goes into the process. Mitigating the risk of essential personnel at this moment in time is more crucial than ever as we all aim to reduce the spread of the coronavirus. Fortunately, the NAHB has put immense effort into a plan that prioritizes the health and safety of home builders and contractors:
“This is why NAHB and construction industry partners have developed a Coronavirus Preparedness and Response Plan specifically tailored to construction job sites. The plan is customizable and covers areas that include manager and worker responsibilities, job site protective measures, cleaning and disinfecting, responding to exposure incidents, and OSHA record-keeping requirements.”
Buying a home is a substantial economic driver today, and when new construction picks back up again, it will be an even stronger recovery force throughout the country. If you’re in a position to buy a home this year, you can have a significant impact on your local neighborhoods and safely make the move you’ve been waiting for. It’s a win-win.