The outbreak of COVID-19 brought about an unprecedented change in housing that has left many wondering if this new normal in real estate will stick around even after the rollout of vaccines and return to pre-pandemic life.
Low Inventory and Higher Prices
In spring of 2020, uncertainty led to a plunge in home sales. Potential buyers and sellers were hesitant to have contact with one another. As a result, some home builders laid off employees and shut down operations. They weren’t expecting the huge surge of activity as people soon realized they needed more space and bigger homes. Even now, due to lumber prices increasing, a shortage of skilled labor, and lack of suitable land, builders are struggling to keep up with the demand.
Some sellers are still hesitant to let buyers walk through their homes or are reluctant to sell their current homes when buying is so competitive, which also contributes to the lack of inventory. And many buyers are first-time homebuyers, who will take a home off the market but won’t be putting one on.
All of these factors are leading to an inventory shortage that is only pushing prices higher. Many properties are receiving dozens of offers, including all cash, well over asking price, and with no inspection required. As a result, this market is very beneficial and often profitable for sellers.
Accelerating Trends
In many ways, COVID-19 has accelerated trends that were already in place pre-pandemic. While some experts predicted in the beginning that people would flee cities in droves, that hasn’t been the case. Many moved to suburbs or smaller cities where they could afford more space, but people are still generally staying near workplaces and businesses.
Millennials have been the largest group buying homes in 2020, with many looking to take advantage of low mortgage rates and find more space. As the largest generation in U.S. history, they have significant buying power.
For those who aren’t ready to move, home improvement projects are also on the rise, with over 75% of homeowners tackling at least one home improvement project since the pandemic began. 31% of those homeowners felt they had to make changes to their space due to working, living, and staying at home.
While unemployment has been high in 2020, those who are still working are looking to spend their money on their homes.
Looking Forward
At this point, it’s still difficult to predict what changes will stick around. In the past, recessions have led to some regions being negatively affected long term, while others were spared. In 2020, every region’s real estate market is experiencing at least an uptick. The increased demand for housing holds across the board, and even the slowest regions are still on the rise, just at a more moderate rate. While lack of supply and still rising prices will create a barrier to entry for some buyers, experts are currently predicting to see similar trends in 2021, with price increases eventually slowing and inventory slowly picking back up later in the year.
In this competitive market, it’s vital to have a knowledgeable REALTOR® to help guide you through the buying and selling process. Visit our agent page or contact us today to speak to one of our experienced agents!
