The housing market continues to thrive through insatiable buyer demand. In a recent poll, over half of Americans believe now is a good time to buy. Zillow economists predict that 6.6 million existing homes will sell this year, the biggest gain (17.2%) in nearly 40 years. Let’s explore the four major trends making this year’s peak homebuying season different from years past.
1. Record low inventory leading to higher home prices
Home prices have increased 21% year over year, with a typical home selling for 1.4% over asking. Several factors are contributing to higher home prices, but it is namely due to record low listing inventory. In fact, the National Association of REALTORS® reported more real estate agents than homes for sale in the United States in 2021.
The rate of newly listed homes is significantly lower than what was seen in 2017 through 2019, according to realtor.com®’s housing data. The lack of housing inventory is largely due to surging lumber and other resource costs which limit new home construction. This challenge is not new, however. New home construction has lagged behind consumer demand for over a decade following the Great Recession. Now, the challenge is accounting for built-up housing demand during the pandemic. Plus, more buyers are entering the market alongside vaccine rollout, making inventory constraints even more pronounced.
2. Homes are spending fewer days on market
With record low inventory, the competition is steep among prospective buyers. People are rushing in and scooping up properties. Homes are spending nearly 50% less time on the market compared to last year. Pending sales jumped +14.1% compared to the same time in 2019, and a record-high number of homes that went under contract accepted the offer within the first two weeks.
3. Increased demand in second homes & vacation homes
This year, demand for second homes accelerated (up 128% year over year) faster than demand for primary residences. According to Qualia’s 2021 Homebuyer Sentiment Index, 36% of recent buyers sought investment or vacation properties.
Record-low mortgage rates spurred the frenzy for second homes and investment properties earlier this year. This trend is expected to continue as mortgage rates remain low. Other contributing factors include the flexibility of remote work, looking for larger homes, and alternatives to primary dwellings in urban areas.
4. More people are moving away from major cities
Remote work opportunities are likely here to stay. With more flexibility, workers are moving to relatively affordable areas in search of larger homes with more outdoor space.
Nearly 9 million people have relocated since the beginning of the pandemic. Many of those people moved away from expensive coastal cities and other urban centers towards suburban areas that are conveniently located near major cities. Major cities including New York, San Francisco, Los Angeles, Washington D.C., and Seattle, took a hit from sweeping exits among professionals who were granted greater flexibility to work from anywhere. While the movement towards the suburbs is nothing new, the pandemic accelerated the trend. In 2020, migration away from major cities increased by 15% compared to 2019, according to CBRE’s analysis of U.S. Postal Service (USPS) data.
While most moves were short-to-moderate distances, often to nearby counties some states are seeing an influx of new residents. According to the most recent Migration Report from Northern American Moving Services, these are the most popular inbound states:
- South Carolina
- North Carolina
Preparing for a record homebuying season
This year’s peak homebuying season presents new challenges for real estate professionals. Those with the right technology to respond and manage the increased and highly competitive market activity will come out ahead.