Where are we now
Real estate was determined to be “an essential service” in April and by May most real estate functions were being performed, following strict state guidelines. There were many debates about whether the economy was heading into a severe recession, projections on how badly the housing market was going to be impacted, and how long the pandemic period might last. Some courageous economists predicted that the housing market would go through what is termed a “V-shaped” period and that it might last for several months. A few of them even felt the housing market had such strong support that the correction cycle might only last for a few months.
I don’t recall reading or hearing of anyone predicting the magnitude of recovery strength that we have experienced. Many homeowners are in disbelief when I tell them that they can sell their homes for more today than ever in history! While the factors leading up to this remarkably strong market are now generally known, it may be worth briefly summarizing how this could have happened.
The primary fuel for the “seller’s market” continuing for the 9th year has been interest rates steadily trending downward all the way up to last month when they finally ticked up a bit. Coupled with the greatest housing shortage as compared with increasing buyer demand, prices have been under upward pressure with only a 2-3 month slowdown early in Covid months. In fact, with the millennial generation beginning to become active homebuyers in increasing numbers each month, the pressure on the housing market is likely to continue for at least several months more.
For the time being, this is the best time ever for home owners to sell. Counter-intuitively, it is also still a great opportunity for home buyers if they are fortunate enough to find a place that meets their criteria. With interest rates still within one percent of all-time lows, homes are more affordable even with the higher prices compared to the costs once rates are even only one percent higher.
The following summary may be of interest to those who like to look at the numbers, derived from actual 12-month MLS records as of March 1. Inventory is now near all-time lows at only 3-months level based on both the actual sales for the full year and the number of homes now in escrow. That means a “seller’s market” is going to continue for several months more at the least.
As one would expect, the rate of failure to sell has gone down – it was around 24%, and as of now is only 15%. Half of the listings sold this last 12 months were under contract in less than 30 days and sold on average for 99% of their list prices. Homes that were not marketed or priced well have taken longer to sell and at greater discounts from the list price. On average, 25% of the homes sold in this period sold on average for 94% of their list prices and took more than 90 days to sell.
One lesson that can be taken from this extraordinary year is that if a home is properly prepared, priced, and marketed, it will sell efficiently and at a good price. Conversely, if it is not positioned well in the market, it may never sell at all, as was experienced by close to 60 local homeowners during the last 12 months.