The U.S. real estate market is nothing if not unpredictable. The pandemic has affected every industry, but few could imagine exactly how it would impact home sales. Triggered largely by job and financial changes, and record-low interest rates, single-family homes are selling faster than ever. This trend is expected to continue well into 2021.
The demand for single-family homes has gone up…by a lot
Homeownership is still an important goal for many Americans. Home sales are up by approximately 7%, reports Realtor.com. While experts believe that there was a pent-up demand for homes last year, and anticipate a minor drop in sales this year, demand will still be exceptional. As supply and demand start to balance out, look for the competitive seller’s market to slow slightly.
Covid may have actually accelerated the homebuying process. Buyers who were thinking of moving within the next few years are now speeding up their timelines in hopes that they can secure more home space, and perhaps a backyard. In Seattle, Omaha, and Lexington, at least 67% of homes for sale flew off the market in under two weeks. Buyers say that they have lowered their personal budgets, but market prices as a whole are increasing due to a rise in demand. In fact, nearly a quarter of buyers who purchased homes between April and June of 2020 paid $500,000 or more for their house, an increase from 14% of buyers in the preceding nine months. Experts are predicting that prices will increase roughly 6% this year.
Fortunately, interest rates are likely to stay low throughout 2021, but don’t be surprised if there is a modest increase in the second half of the year.
Even though single-family homes are the most expensive, buyers may view them as a “safe haven” during a time of instability. Investors who purchase homes geared to mid and high-income renters have the best investment prospects, and the best development prospects among all residential property types in 2021.
Since there is an expectation that the majority of office workers will not be coming in five days a week anymore, people are more open to the idea of longer commutes if they only have to make the trip two or three days a week. As a result, rural areas are getting more attention and new neighbors are moving in at astonishing rates. Suburban areas have seen higher home sales growth than urban areas, and this trend is here to stay.
According to Realtor.com, the top three most competitive real estate markets rights now are Seattle, Omaha, and Lexington. Denver, Indianapolis, Portland, Oklahoma City, Sacramento, Oakland and Tulsa are also very competitive. These areas will continue to thrive in 2021, especially in suburban areas.
The top three housing markets positioned for growth in 2021 are Sacramento-Roseville (California), San Jose-Santa Clara (California), and Charlotte (North Carolina). The strong housing momentum from 2020 has made it possible for these areas to continue growing in 2021. These three markets are doing particularly well because buyers have more options due to fewer supply constraints, home prices are low compared to other places, and the lower cost of housing in these markets creates a lower barrier to entry for millennials and baby boomers.
Online buying might be here to stay
Would you ever make the biggest purchase of your life without seeing it first? Most people are not entirely comfortable buying a home online, but more buyers are viewing properties from their phones or computers. One survey found that 38% of buyers were looking at homes online in May of 2020. That number jumped to 65% by October.
There is a small percentage of Americans that are willing to try purchasing a home completely online. A study from Zillow found that about 30% of buyers are prepared to make a home purchase completely online, even after the pandemic ends. While the majority of transactions aren’t going to occur online any time soon, agents believe that the online buying and selling trend is here to stay. Digital platforms such as Opendoor are hoping to turn this trend into a normal practice. The platform allows people to buy homes without having to engage in bidding wars. Opendoor also offers a buyback guarantee which may help alleviate some anxiety for first-time online buyers.
Condos remain a more affordable option
The pandemic has made condo living a less glamorous experience for some couples and families who are spending all of their time at home. However, those that don’t need extra bedrooms or a backyard will find that this is an excellent time to invest in a condo.
Condo sales dropped 50% in the spring of 2020, reported Redfin. Sales did rebound in October at the same price as single-family homes, however, it’s still much easier to find an affordable condo than it is an affordable house. Listings of single-family homes were down 27% in October of 2020 compared to October 2019, but the supply of condos rose by 5.2%.
Condo prices are also rising at a much slower rate than detached home prices. The widest gap between median sale prices for single-family homes vs. condos was 38.3% in Ft. Lauderdale, Florida. Bakersfield, California, experienced a 35.8% gap, and Lakeland, Florida, saw a 34.3% difference.
In the Seattle metro, where single-family homes are selling for a 17.9% premium, condos are taking months to sell. This is a drastic change as condos are usually sold in a short couple of weeks. It was a challenge to find a condo in Seattle for less than $500,000 before the pandemic, but now there are plenty selling for under $400,000.
2021 will no doubt be another exciting year for real estate. This is a great year to sell if you’re looking to move out of a single-family home. Condo owners may have more difficulty offloading their property, and depending on where they live, should anticipate having to sell for less. Due partially to the pandemic, buyers will encounter a competitive market. However, with greater work flexibility, they may be able to secure a home in a city or suburb that they had not previously considered. About the author: Kim Brown is a writer for Condo Control.