In March 2020, as COVID-19 became a surreal reality, the housing market froze. However, after a few unpredictable months, residential real estate has experienced explosive growth. As the nation is confined to its homes and forced to move to the new norm of teleworking – more space, larger homes, and a better quality of life have become the subject of demand.
Furious buyers seeking refuge from more urban areas, coupled with low mortgage rates, sent the real estate market into a shock. After falling 18% from March to April 2020 and another 10% from April to May 2020, existing home sales rose again by almost 21% in June 2020, according to the National Association of Realtors.
According to LA Times staffer Sarah Parvini:
“Many who leave the Bay Area don’t go far. Counties in the Sierra region, including Eldorado, saw a large influx of migrants from San Francisco compared to 2019. About 4,724 people moved to Eldorado County in the fourth quarter of 2020, according to a March report, a 23.8% increase in entries. compared to the previous year. “
Eldorado County has seen incredible growth due to the pandemic and remains a place that many buyers find desirable for many reasons: larger homes (more bang for your buck), more land, better schools, a sense of community, quality of life, and more. central location with many amenities. Even incredibly high fire insurance rates are not deterring shoppers from searching in Eldorado County, which has seen the highest percentage increase in sales in the region.
With the influx of buyers, there was serious competition in buying houses. Based on my own experience with ads, all of my sellers received multiple offers that far exceeded the list price and incredible conditions. Buyers and their agents do their best to offer real estate to stay competitive. In the past year, stocks have remained low compared to previous years.
According to a June 2021 report from the Luxury Homes Marketing Institute: “The supply is not only shrinking due to the purchase of additional properties, it has also been heavily influenced by the elderly, baby boomers and people living in an empty nest who choose to stay put. Every spring we usually see a huge number of ads coming to market from this demographic as they decide to downsize or relocate. It is predicted that the “trend to stay in place” for 2020 and early 2021 will begin to change and homes will gradually return to the market, especially if the pandemic continues to be manageable. “
Another factor contributing to the supply of housing stock is insufficient construction during the pandemic. Due to the rise in the cost of building materials, private projects and projects of developers have been suspended, which further affects and delays the entry of new stocks on the market.
Demographics and demand levels have been dire over the past 12 months. With younger, wealthier millennials and their increased purchasing power, many of them can work remotely, giving them more opportunities to relocate to more suburban areas, especially for those getting married and starting families. At record low interest rates, they are taking advantage of the opportunity to buy rather than rent. Rentals are also far and away, with ridiculously high rental prices.
The average number of days on the property market is significantly lower than in 2020. Ads fly off the shelf left and right, many of which are sold at list price.
This market cannot support itself, right? So what indicators indicate that the market may eventually slow down?
Renowned real estate appraiser and housing market analyst Ryan Lundqvist shares seven indicators of easing market conditions.
7 ways the market slows down
1. Selling takes longer: Last month it took 12 days to sell a house on average, and six days on average. Since June, it has taken two additional days to complete the contract. It’s still lightning fast, but slower than it was.
2. More homes are selling at or below list price: Right now, a few more homes are selling at or below list price.
3. Fewer Multiple Offers: For two consecutive months, we saw fewer multiples in the Sacramento region. Keep in mind that the percentage of offers is still as high as ever.
4. More listings on the market: We still don’t have enough listings to meet demand, but there are literally hundreds of additional listings on any given day in the Sacramento region compared to a few months ago.
5. Slightly higher monthly inventory: We are seeing a slight increase in monthly housing inventory. Very minor. It’s crazy to say this when we mostly have half a month houses for sale, but supply in most counties has increased slightly from what it was a few months ago. Of course, now we see that mortgage rates have reached their lowest level in several months, so let’s see what happens to the proposal in the near future.
6. We have reached the peak of popularity: in June, the average size of housing fell sharply, which is what we would expect to see in a typical year. This suggests that we are seeing normal seasonality.
7. Rumors on the Street: I hear from many real estate agents, loan officers and appraisers that they have noticed a slightly slower atmosphere. I have not heard anyone say that the market is slow, but there is a lot of talk about slowing down. At the same time, I hear things like “My listing had 23 offers” or “We hit the price again,” which speaks to how competitive it is at the moment.
So what will happen to real estate in the next couple of months or a year from now? It’s hard to say … with the cyclical nature of real estate and a number of factors such as: economic changes, government policies and legislation, and other unforeseen circumstances that may arise … the real estate industry is constantly changing and keeps us on our toes trying to keep our finger on the pulse market.
Erica Kitson is a Certified Luxury Home Professional.