The uncertainty the world faces today due to the COVID-19 pandemic is causing so many things to change. The way we interact, the way we do business, even the way we buy and sell real estate is changing. This is a moment in time that’s even sparking some homebuyers to search for a better deal on a home. Sellers, however, aren’t offering a discount these days; they’re holding steady on price.
According to the most recent NAR Flash Survey (a survey of real estate agents from across the country), agents were asked the following two questions:
1. “Have any of your sellers recently reduced their price to attract buyers?”
Their answer: 72% said their sellers have not lowered prices to attract buyers during this health crisis.
2. “Are home buyers expecting lower prices now?”
Their answer: 63% of agents said their buyers were looking for a price reduction of at least 5%.
What We Do Know
In today’s market, with everything changing and ongoing questions around when the economy will bounce back, it’s interesting to note that some buyers see this time as an opportunity to win big in the housing market. On the other hand, sellers are much more confident that they will not need to reduce their prices in order to sell their homes. Clearly, there are two different perspectives at play.
If you’re a buyer in today’s market, you might not see many sellers lowering their prices. If you’re a seller and don’t want to lower your price, you’re not alone. If you have questions on how to price your home, let’s connect today to discuss your real estate needs and next steps.
Fewer Foreclosed Homes
Thanks to foreclosure and eviction moratoriums, there have been fewer foreclosed homes available than in previous years. On January 20, 2021, newly elected president Joe Biden extended the Foreclosure Moratorium and Mortgage Forbearance Deadline Extension to June 30, 2021. Many believe the number of foreclosed homes will dramatically increase as the moratoriums expire at that time.
Thanks to the increased demand, housing prices have soared, up 13.4% on average. While sellers know they can sell their homes at a reasonable price, there may be concerns about getting a new house they can afford. As a result of this uncertainty, many potential sellers have decided to wait before they put their homes on the market.
Low Mortgage Rates
Thanks to low mortgage rates, many people who might have been hesitant to purchase a home are now eager to buy. There are three primary reasons to take advantage of low mortgage rates:
- Mortgage can be paid off faster
- Build equity
- Save money (less money spent on interest and more on actual principle)
The Coronavirus (Social Distancing)
The coronavirus pandemic has played a large role in the real estate boom. For example, thanks to working from home, virtual learning for kids and social distancing rules, many workers began to seek new living arrangements. Many felt suburban life may help them escape from the civil unrest seen in many large cities. Others needed larger work areas in their homes for themselves and their children.
First-Time Home Buyers
There are over 75 millennials in the United States, making up a quarter of the US population. This next generation of home buyers may be ready to own their first home. Each of these factors play a large role in the current housing market situation.
What Happens Now?
The next 12 months will be critical for the housing market. To determine where we go from here, there are several factors to watch closely:
Will Demand For Homes Increase or Decrease?
On April 28, 2021, the Federal Reserve released a statement pledging to keep interest rates steady. In addition, they announced a continued monitoring of the economy, seeking to achieve maximum employment and an inflation rate “moderately above 2 percent for some time.” By keeping interest rates low, demand could remain high for houses for the foreseeable future.
Will Home Prices Continue To Rise?
Following simple economics, housing prices should continue to rise if demand exceeds inventory levels. However, if rent and mortgage moratoriums are eliminated on June 30, 2021, a large number of foreclosed homes may suddenly hit the market. This could bring housing prices down.
Another important factor is lumber prices. A shortage of lumber has sent the price of new homes even higher: according to the National Association of Home Builders, lumber prices have skyrocketed nearly 250% since April 2020, causing the average price of a new single-family home to increase by nearly $36,000.
Are New Homes Being Built?
According to the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, residential construction is up in several areas:
Building Permits. Privately-owned housing units authorized by building permits in March 2021 were 2.7% above the February rate and 30.2 % above the march 2020 rate.
Housing Starts. Privately-owned housing starts in March 2021 were 19.4% the February estimate, and 37% higher than the March 2020 rate.
Housing Completions. Privately-owned housing completions in March were 16.6% above the February 2021 estimate. They were also 23.4% the March 2020 rate.
Based on these numbers, the housing market boom doesn’t appear to be slowing any time soon. However, it’s important to watch the trends: things could change at a moment’s notice. By paying attention and thinking ahead, you can take advantage of the unique opportunities that come your way.
Why East Bay CA?
East Bay CA is known for it's good economy, beautiful landscapes and extremely popular housing market. When other states and territories have experienced decline in housing prices the Bay Area in general has remained strong. This doesn't mean you should not diversify your portfolio across many states, but East Bay CA Real Estate is certainly a strong place to start for a novice investor. There are even some great low cost homes that are ripe for renovation.
Need More Information?
We have a team of friendly, helpful staff & agents that specialize in East Bay CA real estate and property sales that can help you work out how to best get your property portfolio started. Our agents are here to put your needs first, get you the best deals and offers, help you buy or sell your dream home and build your investment portfolio. Reach out to our team today to find out your options.
If you are looking to find an East Bay Realtor, or looking for homes for sale in East Bay CA, or even to sell your home with someone who will make sure you get the best deal and understand your needs - look no further - when you work with us, consider yourself family.