The real estate data is in for the second quarter of 2021. It was a market like nothing we’d ever quite seen before. The uncertain times of the pandemic reminded people that there’s no more certain investment than real estate, plus there was a unique combination of factors that made the market extremely fast-paced.
Unique Seller’s Market Conditions
Mortgage rates have been at historic lows. Because of the low rates, along with changing housing needs and increased flexibility because of remote working opportunities, buyer demand skyrocketed. Meanwhile, housing inventory was crucially low. This made for the peak of a red hot seller’s market in Q2 2021. Home prices were through the roof, houses were selling fast and buyers were forced to make ultra-competitive offers.
Let’s look at some of the national numbers:
- Housing Inventory: 2.4 months supply (down from 4 months in Q2 2020)
- Median Sales Price: $341,600 (up 19.1% from Q2 2020)
- Housing Starts: 1.59 million (up 15% from Q2 2020)
- Existing Home Sales: 5.85 million (up 20% from Q2 2020)
- Average Days on Market: 17 days (down 10 days from Q2 2020)
In addition, homes were receiving multiple offers (five, on average) and selling way above asking price. Home buyers were making concessions like higher down payments, paying with cash and waiving inspection and finance contingencies. All the power was in the seller’s favor, but that didn’t quell the buyer demand in the least.
Remember, this is national data. Real estate for you and me is local. While the trends are consistent, each local market has its own specific data points that we discuss with our clients for their specific needs and objectives.
3rd Quarter Slow Down
As we’ve discussed in the last couple Cyr Team Blog articles, the market has slowed down somewhat in the third quarter of 2021. It’s been a slight market “pause” in several respects, but definitely still a strong seller’s market. It’s just not as crazy red hot as it was a few months ago. Inventory was rising as more people wanted to take advantage of strong prices. Mortgage rates have held steady, but increased inflation could cause an increase over time. Buyer demand is still strong, but some buyers have taken a pause as they get priced out of the market. Those still actively looking appear less desperate and are willing to wait rather than purchase a home that overpriced for its condition. Home prices haven’t been appreciating at quite the same rate. Not all homes are getting into insane bidding wars and properties are taking a little longer to sell. Sellers have to take more time and make more effort to prepare in order to get maximum value for their houses.
Is the Bubble About to Burst?
We’re seeing a slight leveling out of the real estate market nationwide and here in the tri-state area. This is a natural self-correction. It is important to note, however, that we are not in a “bubble.” 2021 is very different than 2008. There are many more fixed-rate mortgages today and lending restrictions got much tighter after the last market crash that was largely the result of sub-prime mortgage loans and poorly structured adjustable-rate mortgages (ARMs).
The mortgage market is much healthier in 2021 and homeowners are better protected. Plus, we had the foreclosure moratorium and mortgage forbearance options in place during the pandemic that have also helped people stay in their homes during these tough times. The real estate market was also overflooded with supply in the early 2000s. Today, housing inventory is still very low by historic standards. Even if the market eventually shifts toward more of a buyer’s market, it will be a gradual and necessary movement—not a catastrophic “bubble burst” that sends the economy into a tailspin.
What to Expect in Late 2021 and Beyond
The slight slow down we are seeing in Q3 is natural and actually going to be healthy for the real estate market in the long-term. No extreme market conditions like the seller’s market of late 2020 and early 2021 can be sustained for too long. The market always self corrects. The good news is this correction will be more slow and gentle compared to the violent crash of 2008. It’s likely to stay a seller’s market for awhile and we may see some more hot market spikes before the year is through. With the continued expectation of inflation and increased demand for homes, purchasing a home now is important. They will only be more expensive in the future.
We’ve said it before and we’ll say it again… If the past year and a half taught us anything, it’s to expect the unexpected!
If you are thinking about buying or selling a home in the Southeastern Pennsylvania or Northern Delaware area, contact The Cyr Team to get started. It’s important to be prepared and to take all the necessary steps to get the most out of your home purchase or sale in today’s ever-changing market. We’ll help you make the right decisions throughout the process.