One of the biggest stories of the COVID-19 pandemic in the US has been its impact on residential real estate markets of all shapes and sizes. Every sector of the market, whether it is in-town or outlying suburban areas, has seen unique opportunities and challenges.
How do you determine if this is the right time to sell or buy a home? It all comes down to the supply and demand in your neighborhood, as well as your willingness to adapt to changing market conditions in the months ahead.
Late 2021 Home Price Predictions
A combination of both record-low interest rates and low inventory in markets throughout the country has resulted in unprecedented home valuations, with median home prices surging nearly 25 percent year-over-year in recent months. This rapid increase and the overwhelming uncertainty attendant on everything related to COVID-19’s impact on the economy has led to speculation about the long-term effects on the housing market and whether the law of diminishing returns will come into play.
While predictions can be difficult, there are plenty of reasons to believe that residential real estate will remain active and strong in the months ahead. Here are some reasons.
Forbearance may lead to increased inventory
CARES Act Economic safeguards put in place during the initial days of the pandemic (including forbearance for government mortgages) are due to expire in September. Many homeowners will have made arrangements for refinance and repayment of their mortgage payments. Others will likely put their homes up for sale in response to the end to forbearance.
According to the Federal Reserve, homeowners in forbearance are unlikely to be able to pay off their loans. This will result in more homes for buyers who are eager to buy. This may be especially evident in less-expensive markets or in first-time-buyer-friendly properties. Having more inventory can help stabilize these sectors and protect them against the inflation effects.
The Delta variant’s impact remains uncertain
While the Delta variant has been making headlines, it is not clear what its impact will be on the housing market. It could result in increased lockdowns and low inventory conditions. However, the relative effectiveness and efficacy of US vaccination efforts as well as the FDA-approved Pfizer vaccine might help to limit market effects and prevent further shutdowns.
In addition to the fact that momentum is returning to recovery mode with increased travel and interest in big city residential markets, it’s difficult to envision another large-scale shutdown in a short time. This, combined with historically lower fall and winter demand, could help keep the market more balanced.
Buyer behavior could begin to normalize
According to experts, buyers might have gotten tired of paying top dollar while competing with dozens other offers. This could lead to normal buyer behavior, which can result in stable home prices, increased days on the market, and an increase in inventory.
There are many reasons buyers might not want to get back into heated negotiations.
- Buyer fatigue from previous frustrated home searches
- Distractions from the return to in-person schools, workplaces, and activities
- Rising interest rates and increases in home inventory
- The ability to travel for or host holiday celebrations in late 2021
- Concerns that rising home prices may finally outweigh potential return on investment
The much-lauded real estate bubble does not look set to burst.
While many analysts predicted a collapse in real estate prices, others believe the markets will continue to grow at a moderate rate or remain stable. According to CoreLogic, home prices will continue to rise by more than 3 percent over the next several months. What are some of the reasons?
- Continuing low-interest rates for the foreseeable future
- Low home inventory and new construction rates that predate the pandemic
- The continuing demographic impact of Millennials as they age into the homebuyer market
- The increased impact of remote workers looking to buy in more affordable markets
So is late 2021 a good time to buy or sell?
While the fall and winter months may not be as active as they were in 2020, late 2021 is still poised to be an active time for the US real estate market.
This is a great time for buyers to start a new home search. This is a great time to buy, with high levels of personal savings, low interest rates, and increased home inventory. The best buyers will be flexible and preapproved, will make quick decisions and are open to changing their list as needed.
For many sellers, this is the time to think about whether slowing home prices make it an ideal time for cash out. This is especially true if frustrated buyers return to the market. Most sellers’ biggest concerns will be where and when they will find new buyers in their market. You should look for buyers who will work with you on your schedule or are willing to rent back your home while you are searching for your next home.
A consultation with a trusted real estate agent is your best option in any market. A trusted agent can give you the information you need about current market conditions and local home prices so you can make better decisions whether you are buying or selling.