The tight supply of properties coming on to the market and a surge of cashed-up millennials seeking their first property has been driving real estate prices higher across America.
With low interest rates, millennials’ confidence in property has resulted in them being the largest single group (38%) of prospective buyers. And so the record-breaking year of growth that real estate experienced in 2020 is likely to extend beyond this year.
The value of a typical home jumped 8.4% last year, according to the National Association of Realtors. And the 5.64m residential properties sold last year was the most since the Global Financial Crisis of 2008-09.
In the year that Covid struck, that is an incredible result.
At the core of real estate’s resilience is an imbalance between supply and demand.
In some parts of the US, the supply of properties coming on to the market is down 30%. To put it simply, there are not enough properties to go around. There is a seasonal element at play right now, as many sellers have been waiting for warmer weather to start their marketing campaigns.
But there’s a strong cohort of support that keeps pushing prices north – record low interest rates, strong economic confidence, government incentives and the pent-up demand created by nervous owners withdrawing from the market when the global pandemic first hit us.
According to Zillow’s research unit, home values may rise 13.5% year-on-year by the middle of the year before easing back to finish at 10.5% for the entire year. The cloud on the horizon is interest rates, which are edging higher and may dampen demand in the second half of the year.
So what does this mean for you? As an experienced agent, I’ve jotted down these thoughts to help you calibrate the market’s behavior with your own aspirations as either a buyer or seller.
For sellers, maximize the value of your property. No seller should assume a red-hot market is going to automatically deliver you a top-dollar result. Spend time to ensure your home is well-presented. As your agent, I can help you identify improvements that will help achieve a great sales outcome. With so much to gain, you should consider staging your home to make the ultimate impact.
For buyers, don’t panic. If you’re serious about your property quest, then stick with your plan. It’s not easy, but you will be successful eventually. It’s a great idea to synchronize with your agent continually. You want to know what’s coming on to the market so you can make your play early, possibly beating other buyers with an early response.
Don’t try to time the market. Waiting for the market to go down if you’re buying or up even further if you’re selling could backfire. There is a wide range of research that shows the folly of this strategy. Economic indicators show the prices may continue to rise for some time but it’s not a certainty. If you need to sell now, don’t wait.
The market won’t stay hot forever. Prices will level out eventually but don’t assume they’ll fall dramatically. So, don’t second-guess the market or convince yourself there’ll be a correction that could cause panic. Stay with your plan and keep searching for the dream property you can afford.
Continue to research and monitor. Remember, American real estate consists of thousands of micro-markets. So rather than worry about media headlines, keep looking at the results being achieved in neighborhoods to help you understand what local properties are selling for. Be mindful, too, of the style of property you favor and how those homes are performing price-wise.