After initial COVID-related disruptions to the real estate market in March 2020, real estate was declared an essential service. Subsequently, virtual transaction and marketing processes made it possible for buyers and sellers to move forward with home sales. What followed was one of the most active real estate markets in recent memory, with buyer demand far outstripping the availability of listings in markets all over North America.
In the process, low interest rates and multiple offers became commonplace, driving up home prices, giving homeowners unprecedented levels of home equity, and making them even more reluctant to put their homes on the market. After all, the thinking goes, wouldn’t it make sense to continue holding out and see how high the market will rise?
Now, however, as we pass the one-year mark, it’s time to talk about next steps, and why it might finally be time for homeowners to pull the trigger and put their homes on the market.
Interest rates are on the rise
Interest rates are currently rising, leading to a stall in applications for new mortgages. While they are still low, when coupled with less affordability in most markets and the potential for multiple buyer offers, any rise in rates may be enough to cool off the red hot seller’s market. If rates continue in an upward trend, this may mean less activity in the spring market and less incentive for buyers already suffering from the frustrations caused by low inventory and months of fruitless searching.
COVID vaccinations may mean a return to normal
The rising availability of the COVID-19 vaccine in communities across the country may soon lead to a return to more normal housing availability—and less overwhelming buyer demand. That could mark the end of multiple offers and unprecedented high home valuations. By putting your home on the market sooner rather than later, you can take advantage of the last gasps of this increased demand before a return to more standard market conditions.
Buyers are returning to higher-inventory markets
Over the past year, one of the biggest stories in real estate has been the mass exodus of buyers from condominiums in urban markets to the perceived safety and security of suburban and rural single-family homes. However, increases in buyer demand are being seen in cities like New York City, Chicago, and Boston, all of which are experiencing a record pace of sales as of March 2021.
While this is good news for property owners in the cities, it may mean reduced demand in suburban and rural markets. The increased inventory in the in-town multifamily sector may provide welcome relief for buyers frustrated by their long search for a picture-perfect detached home, especially if widespread vaccination reduces the risk of COVID-19.
Business as usual may mean more distractions
Think about what your friends and family are planning for the end of the pandemic. Travel, entertainment, concerts, dining out—many potential buyers frustrated by a year or more of nesting at home will be looking for places to go and people to see. That may leave less money dedicated to down payments and mortgages.
While some potential buyers put away unprecedented amounts of personal savings over the past year, they may find other things to spend it on after a year of social distancing. While some will splurge on personal and luxury items, others may be spending their savings on long-delayed purchases that can no longer be put off, like new cars, home repairs, and school and professional clothing.
New construction has ramped up to meet demand
Frustrated home buyers turned off by the competition in the resale market have turned to new construction to satisfy their demand—and builders have responded in kind. Housing starts soared to levels not seen since 2006, and some buyers may be willing to wait for a new home rather than settle for a resale home that they’re not in love with.
In addition, as home sellers become less willing to negotiate needed repairs, buyers may see new construction as a reassuring alternative to buying a home that lacks basic updates and upgrades. In addition, permanent work-from-home policies may allow buyers to build the home they want wherever they want, making a new construction home even more attractive.
A glut of new listings could undermine market valuations
Of course, timing the market is one of the most important factors when deciding whether or not to list. With a return to more normal social and market conditions, many sellers who’ve been holding their breath waiting for the perfect time to sell may suddenly decide that this spring is their moment. This has the potential to flood the market with new listings just when buyer demand is easing off.
Aside from offering increased competition for buyer attention, waiting too long can become a self-perpetuating process and complicate pricing the home to sell. By pricing a home too high and chasing the market valuation downward, some sellers may find themselves settling for far less than they expected from their home sale. In addition, buyers with more options won’t be as inclined to participate in multiple offer bidding wars and will almost certainly be expecting to negotiate contingencies and repairs.
The best way to know what is going on in your local market—and what’s on the horizon—is to talk with a local real estate agent or broker. An agent can provide you with recent sales in your area an d help you evaluate current trends. In addition, they have a better sense of where the market is going based on recent activity and a robust professional network.