Bring on the red-hot housing market
This past year has brought many surprises, including, for many, a renewed appreciation for home—and a desire to expand the horizons of what our homes can be. For some, remote work has prompted a reimagining of our primary living locations, while others have added new secondary home escapes. Still others have looked to buy locally, finding new spaces with upgraded features, from dream backyards to freshly renovated kitchens.
Between record-low interest rates and record-high interest in new and second homes, the red-hot housing market has been one of the most talked-about surprises of the last 18 months. Realtors agree the atmosphere has been as electric as they’ve ever seen it, and momentum has built with every passing month. From rocketing buyer bids to a high demand for destination housing, we’re sharing a glimpse of the country’s current housing landscape.
Soaring prices, rapid turnaround
Buyers are going to extremes to land the purchase—as shown by bidders offering $1 million over their asking price (or paying a competing bidder hundreds of thousands of dollars to continue their search).1 Some are going as far as to pay for future homes—earning the seller’s attention by purchasing their next home, too. Their reasoning? Rather than risk an uptick in property taxes by offering too much over asking price for house number one, some of these buyers are opting to funnel that cash towards a different transaction altogether.1 Homes have been reported to have received upwards of 100 offers, with many buyers upping their bids—and that’s without any countering. Take, for example, this year’s first quarter, when more than 300 home purchases sold for more than $1 million over their asking prices—a data point up nearly 75 percent from last year.1
Then, of course, there’s the question of turnaround timing. Homes across the U.S. are selling faster than in previous years—earlier in 2020, Zillow reported an average of 25 days on the market (as compared to 30 days in 2019), with numbers changing rapidly—in September, sales were happening within just 16 days.3 Halfway through 2021, many houses have sold within just a handful of days—if not hours—meaning those serious about settling down are coming prepared to act fast (more on that below).4
Hottest housing markets
At the onset of the pandemic, homeowners began to rethink their housing needs, realizing a greater interest in space, both indoors and out (from at-home offices and gyms to outdoor porches and pools). As has been widely reported, many urbanites opted to seek out that space in suburbia—or in new towns altogether, packing up their pads for greener pastures in where sale prices were lower and where inventories were higher.5 There was also the rise of what Forbes has reported as “Zoom towns,” areas like Cape Cod which were formerly seen by some as vacation towns, but became popular for some buyers as full-time destinations as work from home became possible for many.6 Then, there are those who don’t mind staying put for most of the year—so long as they now have a secondary home to call upon for mid-month getaways or summer staycations—or to use as investment properties.
Just a few of those peak places now? Sun Belt destinations like Phoenix, Arizona and Tampa, Florida have flourished, thanks to affordable, well-sized homes and attractive climates (in weather and economy alike).7 Perhaps the one to outshine them all, though, is Austin, Texas, where this year’s population increased by 3 percent from the previous year, according to U.S. Census Bureau figures.8 Add to those perks the fact that these areas (along with Salt Lake City, Utah) have among the highest annual rates of appreciation among the 50 biggest markets, and you’re looking at high-value housing moves in many directions.9
A seller’s—and buyer’s—market
While inventory has been low (and moving at lightning speed), there are still bonuses to be had for the buyer, too—namely, record-low mortgage rates. Earlier this year, Freddie Mac reported that the average interest rate on a 30-year fixed-rate mortgage dropped to 2.65 percent—the lowest in the 50 years the company had been reporting such figures, and nearly one percentage point lower than last year.10 The other upside? Some experts predict the number of housing listings may rise, noting that some may have been wary of going through the selling process earlier in the pandemic.11 There are a few tips buyers can take to better ensure success in a seller’s market: Cast a wide housing search, be realistic about what you’re able to afford, and, most of all, be ready to act fast. Acquiring mortgage pre-approval, showing proof of financial means for your down payment and closing fees, and (of course) securing insurance can be requisites in getting one step closer to a move-in.11 (Note: Our tip? Look for insurance with a provider who is responsive, reputable and attuned to the demands of today’s extraordinary housing market)
As we head towards fall, the market remains red-hot—but there is some potential for buyers and sellers to take a breath in sight. “Historically, the fall ushers in less competition and better deals as children return to school and the holidays overtake schedules,” notes Natalie Campisi of Forbes.6 While fall 2020 did not follow this trend, in late summer 2021, there are signs now that the market may be beginning to cool.12 “Prices are beginning to decelerate in some areas as more inventory has become available for single-family homes,” adds Campisi.6 This might be welcome news for those looking to buy. Either way, we (like many) will be keeping a close eye on the market in the months ahead.
Berkley One is a Berkley Company.