With mortgage rates at historic lows, experts predict rates will remain favorable throughout the year. The real estate market is expected to continue to do well in 2021 and the biggest challenge facing the market is the lack of homes available for sale. According to the National Association of Realtors (NAR) The housing market inventory of available homes for sale is currently at an all-time low. The NAR explains:
“Total housing inventory at the end of December totaled 1.07 million units, down 16.4% from November and down 23% from one year ago (1.39 million). Unsold inventory sits at an all-time low 1.9-month supply at the current sales pace, down from 2.3 months in November and down from the 3.0-month figure recorded in December 2019.
A wholly balanced market will have a six-month supply of homes.
What Does This Mean for You?
If You’re a Buyer:
Be patient with your search. Expect it to take time to find a home you love. You may lose offers on several before you get an accepted offer. To avoid this, when you find the right home, you need to be ready to pounce! You should always be pre-approved for a mortgage before looking. Don’t bother looking for homes before getting a pre-approval with a reputable lender; you will only waste time and lose the house if we need to wait. You have to be prepared to make a competitive offer from the very start. Know that in this crazy market, you could end up in a bidding war and you may have to pay over the listed price to win the home. Many homes sell over list price with other factors that sweeten the seller’s deal, such as extended occupancy, seller rent backs, no appraisal contingency, and no inspection requests. You’ll be in great shape if you’re able to calculate in advance how far you’re willing to go to secure your offer. Trust your real estate agent’s expertise to help guide and navigate you through the offer process. According to Lawrence Yun, the Chief Economist at NAR, there is some good news:
“Homebuilders and construction companies have increased efforts to build, with housing starts hitting an annual rate of near 1.7 million in December, with more focus on single-family homes…However, it will take vigorous new home construction in 2021 and 2022 to adequately furnish the market to meet the demand properly.”
If You’re a Seller:
It’s a seller’s market! In most ways, you are in the driver’s seat. It is all about supply and demand. With the inventory shortage and strong demand for homes, the seller is more than likely in a great position to negotiate the best terms for them. Likely you will get what you want when it comes to price, moving date, and potential repairs. Even though you hold the property and the upper hand, it’s best not to be unreasonable when it comes to negotiations.