Thursday, August 12, 2021 / by Cindy Hurley
The real estate market is always changing and the summer/fall 2021 is sure to follow suit. Realtors share insights and give us a glimpse of what’s to come.
Today’s real estate market has been called many things, from being likened to the Wild West, it’s crazy, alarming, and insane. Realtors who participated in HomeLight’s 2021 Summer/Fall Top Agents Insight Report voice their concerns and highlight key factors that will shape the market during the second half of 2021.
High prices make buyers think twice
According to the survey, 54.4% of realtors have seen contracts fall through because buyers balked at the extremely high prices for homes. This is a problem even among rural and small town communities.
Why does this happen? Right now, buyers probably have put in offers on a few houses and didn’t win the bid. So when they finally find a house and their offer is accepted, they’re thrilled! But when they sit back and crunch the numbers again, they realize that the price of the home is inflated and their elation is dashed. They ask their realtor for a way out of the contract and the house goes back on the market.
Areas with affordable housing could see more bidding wars
Despite buyers backing out of contracts, 37% of realtors say the number of bidding wars in their area is on the rise, while 54% say the bidding war phenomenon is at its peak. With that said, realtors have started to advise their seller’s to resist the urge to overprice their homes because that’ll decrease the number of buyers interested in the house and if it’s too high, they’d have to reduce their asking price.
Inventory slowly improves as seller’s health concerns diminishes
As people get vaccinated, 45.4% of realtors say sellers aren’t as afraid of contracting the virus as they were a year ago. This is a great thing for realtors because as more sellers list their homes, the inventory will be replenished so that buyer demand can be met. However, they are concerned that inventory won’t replenish fast enough to fully satisfy demand.
New construction is hampered by volatile material costs
The cost to build a new home is significantly higher than it was a year or two ago. Just the lumber needed to frame a house has increased by 250% from April 2020 to April 2021. The price used to be (on average) $350 per thousand board feet. However, now it’s a whopping $1,200 per thousand board feet. That adds an additional $36,000 to the average new build.
What’s more concerning is that many buyers aren’t going to know the final price of their new build until later in the project. 44.8% of realtors say builders are pricing homes later in the building process due to market uncertainty and material cost fluctuation.
Financed buyers can’t compete with cash buyers
The interest rates are still relatively low and 30.1% of agents say buyers are encouraged to take advantage of those rates. For the buyer getting a mortgage, the low rates may feel like they hit the lottery, but when the house they put an offer on receives another offer - a cash offer - the seller almost always goes for cash. This is particularly the case for buyers who have financing contingencies.
The outlook for 2021’s housing market
The future of 2021’s real estate market may look bleak and it may not give you the feeling that this is a good time to buy. After all, how can you compete with cash buyers bidding on houses in areas with limited supply. Buyers may not even consider new construction homes because the cost of materials is still so high.
All of this aside, the market is still moving. The vaccine continues to make its rounds and sellers are starting to feel safer from contracting COVID. This would lead to more people listing their homes and it’s only a matter of time before the scales are balanced once again.