Real estate is cyclical year-over-year. The spring market typically begins in March. Many real estate professionals believe it begins right after the Super Bowl. The market normally remains strong, and home values rise, through the spring and summer months. It usually starts to slow down in August, right around the time school starts for the new school year. It continues to slow down in the fall. The winter months are historically the slowest. The 2021 fall real estate market is going to be different. It is expected to remain strong throughout the fall and winter months this year.
The Covid-19 Pandemic
The Covid-19 pandemic has had quite an impact on the real estate market the past year and a half. According to an article written by Jared Bernstein, Jeffery Zhang, Ryan Cummings and Matthew Maury on whitehouse.gov, "The Covid-19 pandemic shifted families' preferences for location and type of housing, exacerbating existing supply chain constraints that, for several reasons, have persisted for many years. These pandemic-related changes interacted with the existing housing inventory shortage, resulting in sharp price increases for both owned homes and rental units." While we continue to navigate through the pandemic, the real estate market remains strong.
Supply and Demand
The supply of available homes for sale is historically low right now. Researchers at Freddie Mac have estimated that "the current shortage of homes is close to 3.8 million, up substantially from an estimated 2.5 million in 2018." Buyer demand is very high and prices are rising at record-breaking levels.
There are many types of home buyers in today's market. According to data from the National Association of Realtors, first-time buyers made up 31% of buyers so far this year and 33% last year. The same report shows that 12% of home buyers are getting together with family and purchasing a multi-generational home. Investors are taking advantage of the extremely low mortgage interest rates. It's a fantastic time to borrow money cheaply. Retirees and people who are working from home indefinitely are purchasing homes in the south where the weather is warmer year-round.
Sellers were hesitant to sell at the beginning of the Covid-19 pandemic. They are slowly coming out of the cracks and listing their homes for sale. They are witnessing the strong seller's market. Measures by the Case-Schiller Index find that home prices have increased by 7-19 percent year-over-year. The price range increase covers everything from the condition of the home for sale and the location. The best locations have the best price increases. This hot seller's market, and continued rising home values, is not going to end anytime soon.
At the beginning of 2021, the interest rates fell below three percent. They continue to hover right around or slightly above three percent. There is no indication that they will rise too much higher this fall. An article on keepingcurrentmatters.com states, "One of the biggest drivers for the booming real estate market was record-low mortgage rates." This continues to bring out more buyers which certainly doesn't help close the inventory shortage gap.
New construction communities are selling and building homes at a fast-paced rate. The website census.gov shares that there were more new residential construction homes built between 2020 to 2021 than in the five previous years. The lack of existing home inventory helps increase new construction sales.
Real estate professionals and experts predict that the fall real estate market will continue to see appreciation. The pace may start to slow down or balance a bit while more listings come to the market and buyer demand slowly diminishes.