Historically, the real estate market sees an uptick in new listings, total sales and overall traffic to search portals during the spring season (March-June), and a steady decline in those same figures in the fall months (September-December). However, in 2020 we’ve seen the exact opposite.
Despite the abrupt market halt in March 2020 when COVID-19 shut down the country, the housing market began recovering just a few months later in May and has yet to slow down. Homesnap analyzed what this could indicate for 2021.
CURRENT TOTAL SALES ARE OUTPACING NEW LISTINGS PER MONTH
Prior to the pandemic, Homesnap reported that the U.S. housing market was experiencing an overall lack of inventory — buyer demand was continuously outweighing new homes on the market. Although many have reported on the health of the market today, pointing to the recovery in late spring, Homesnap reports that the current rate homes are selling is outpacing the total amount of new listings brought to the market each month. In other words, inventory is still extremely low.
Homesnap reports only a .22% INCREASE in the total amount of new listings brought to the market in October 2020 vs. October 2019 (illustrated in Chart A). In comparison, there has been a 19.29% INCREASE in total sales in October 2020 vs. October 2019 (illustrated in Chart B). This trend could be forecasting a further draining of the inventory as we head into 2021.
CHART A*
CHART B*
HOME PRICES ARE RISING TO MEET BUYER DEMAND
As a result of overwhelming buyer demand and low inventory, home prices are rising. Homesnap reports that the Average Sold Close Price for homes has significantly increased throughout 2020. Average Sold Close Price, which Homesnap defines as the average list price for properties that have sold, rose 6.7% from September to October 2020. This is significantly higher than the same figure in 2108 and 2019.
WHAT DOES THIS MEAN FOR 2021?
There are many factors contributing to the current intense market demand. Strong buyer activity can likely be attributed to pent-up demand from the lack of buying and selling from March through June, as well as a greater interest in relocation. As we head into the winter season, Homesnap predicts that buyer activity will remain strong, but will be hampered as inventory is depleted.
In 2021, Homesnap predicts that the real estate market will remain strong, following the traditional pattern of increase in the spring. As median home prices continue to soar, homeowners who may have been interested in selling in the next 3-5 years may list their homes sooner, freeing up more inventory.
In addition, Homesnap predicts that the real estate market will continue to be competitive throughout 2021 as more people are looking to relocate due to the pandemic. For example, Homesnap agents have reported that a substantial amount of homebuyers have been looking for properties in more rural areas outside of major city limits. People are relocating for multiple reasons — they are seeing the appeal of a more spacious suburban lifestyle, they need more space, are no longer commuting to the office or they want to be closer to family, etc.
If you are looking to purchase a home amidst the increasingly short inventory and high demand, Homesnap’s founder Guy Wolcott has identified some key tips for home buyers:
- Be Flexible, And Be Prepared to Act Quickly — To land a home in a competitive market, you need to be ready to make a decision quickly. Decide in advance which features you are willing to compromise on, so that you can be as flexible as possible when it comes to moving forward with a property. Waiting days to make a decision may take you out of the running. Act decisively, with your agent’s counsel.
- Be Realistic About Your Budget. — As home prices continue to rise, it is important to always be realistic about what you can spend on a home, especially for first time buyers.
- Stay On Top Of New Listings — As the amount of days a home spends on the market is rapidly declining, make sure you’re using a platform that provides you with the most accurate and up-to-date information, like Homesnap. Homesnap gives you access to the same real-time housing information that real estate agents use. Relying on outdated data may make you lose out on a home in this highly competitive market.
**Note: Homesnap data is reported through October 2020.