There’s no doubt that 2020 will be seen as the odd year out due to Covid-19. So many things happened last year. The massive buyer demand appeared in March and cautious homeowners that would normally be preparing to put their homes on the market pulled back.
Those that did decide to jump into the frenzied buyer pool were met with the stress of having to make on the spot purchase decisions. Many gave up the safety net of home inspections (or at least asking home sellers to bring properties up to previously expected conditions).
Others armed with greater buying power due to continued record low mortgage interest rates found themselves frequently in bidding wars and using escalation clauses or even guaranteeing to make up the difference if the home didn’t appraise. This buying fever even spilled into the first half of 2021.
Everything That Goes Up Must Come Down (and Vice-Versa)
The second half of 2021 is looking quite different from the first half of this year. Make no mistake, our real estate market is still very active with homebuyers, especially in the under $300,000 resale market, but a funny thing happened in June on the way to July and beyond.
The Number of Homes For Sale Began To Rise
After a year and a half of Home For Sale inventory falling, (at the peak of the 3rd Quarter in 2019 there were just over 4,000 homes for sale), the number of homes for sale in 2021 finally began rising after bottoming out in the 1st Quarter at 1,693 properties on the market. At first this increase looked to be slow, but in the 3rd Quarter of 2021 the Quarterly Median For Sale Count is pushing above 2,400 and it looks like we will have a chance of coming close to 3,000 homes for sale at years end for the first time since before Covid-19 arrived in late winter of 2020.
Sale Pendings Slowing Down Quickly
One of the best leading indicators of market activity is following the count of homes in Sale Pending (under contract and in the inspection/financing/closing process). There are so many hurdles that must be overcome during this timeframe.
At the beginning of this article, I mentioned some of the challenges of keeping a sale together. Getting through home inspection periods and appraisals are by far the two biggest obstacles in the sale of a home.
But other factors have been at play this year as well. With on-the-spot purchase decisions and multiple offer bidding wars, many would-be homebuyers have experienced buyer’s remorse. Others have had financing issues, even after presenting a loan pre-approval letter from their mortgage lender.
A typical year would show Sale Pending activity building steadily during the first two Quarters of the year, the 3rd and 4th Quarters would show a downturn, but would be more gradual until the months of November and December. These last two months are historically the slowest months for sales activity as homebuyers and sellers alike prepare for the upcoming holiday season and for winter to set in. 2021 has been more like a rocket launch during the first two Quarters of the year with the 3rd Quarter on a downward trajectory that we haven’t felt for a very long time.
It’s Not Just All About Homes For Sale or Sale Pendings
In 2021 we have experienced one of the fastest increases in home pricing ever seen. In the five-year period prior to 2021, the Median List Price of homes for sale hovered around $275,000 with seasonal fluctuations.
So far in 2021 the year-to-date Median List Price of homes for sale has been $305,000. This $35,000 jump in home pricing has been largely due to the number of new construction properties that have taken over our market during Covid-19.
With fewer resale properties on the market, home builders have been able to fill much of the housing gap from normally pre-existing home sales. Even with the rise in the cost of lumber, record low mortgage interest rates allowed many more buyers the opportunity to buy new during the pandemic.
Side effects of this type of market are the Days on Market and Months of Inventory. Median Days on Market has been in single digits all year long with Q1 at 8 days, Q2 at 3 days and Q3 so far rising slightly but still only at 5 days on market. Likewise, Months of Inventory has been below 2 months which is not unexpected with the records pace of sales.
Bring Out The Crystal Ball
Next month, I will dig out my crystal ball and make my year end predictions along with what I foresee happening in 2022. One thing is certain in the world of residential real estate—there’s never a dull moment!