What’s Next for the Real Estate Market and How Will It Impact Buyers?

We’ve all heard the outrageous stories of tumbledown houses selling for record-high prices, dozens of multiple offers within hours of a new listing hitting the MLS, and bonuses and incentives to sweeten the pot from hyper-competitive buyers. Much of the demand over the past year and a half has been unexpected and attributable to a variety of factors related to the pandemic.

Now as the United States enjoys a return to something like normal in many markets, buyers who were previously disappointed by low inventory and outsized competition may be considering rebooting their home search. Unlike most years where market activity slows down after Memorial Day, pent-up demand may keep many areas more active than normal in the months ahead. If you are an interested buyer, is it finally time to go back and start looking for your next home?

According to many of the current predictions for the second half of 2021, the answer may be yes. Although there is nothing predictable about the state of the US real estate market, there are some indications that we may be going back to something that is a little more like what we are used to. Here are some of the biggest takeaways from the current expert analysis.

Recent data suggests that buyer demand is beginning to slow.

The US Commerce Department recently released data that shows that demand for single-family homes dipped in May by 5.9 percent, a one-year low. While this decline is suggestive, it must be remembered that it is in comparison to a uniquely overheated real estate market.

There may be a number of reasons for decreased buyer demand, including:

  • Increased availability of vaccines, allowing people to take advantage of summertime travel and social activities while deprioritizing their home search.
  • Disruptions to pandemic-related activities, including home searches, as workplaces begin to call remote workers back into the office.
  • Thoughtful analysis of next steps, including long-distance moves or changes to short-term priorities.

Whatever the reason, with demand beginning to slow, inventory is predicted to increase, albeit modestly. This may help to overcome some of the more heated competition among potential buyers. While they may still be paying far more for a home than they would have paid a year or two ago due to rapidly increasing home values, hopeful home seekers may not have to pay outsized buyer premiums if there are fewer buyers.

At the same time, more sellers are ready to cash in.

Sellers kept their homes off the market for a variety of reasons during the pandemic. For some, there was the basic fear of having strangers walking through their home or the anxiety associated with moving all their belongings from one house to another during a time of uncertainty.

As the market heated up and competition for every home took off, many sellers were simply afraid to list their houses for fear that they would be unable to find a home to buy. This was especially true in high-demand markets and niches like luxury homes where inventory was exceptionally low.

Still, other sellers were seduced by the siren song of increased equity, choosing to hold their cards until they could see how high market valuations in their neighborhoods would rise. Now many of those sellers have finally decided that the market is nearing its peak, at least for a while, and they are ready to cash out.

June saw new listings increase by 6.7 percent month-over-month, according to some figures, with 54 of the top 100 markets experiencing increased activity. That’s good news for buyers, helping to loosen up some of the tight inventory and slowing down price increases through increased supply.

Mortgage rates are predicted to hold steady or rise gradually, remaining below pre-pandemic levels.

Although they may rise a bit below their historic pandemic-era lows, interest rates are projected to hold relatively steady in the low 3’s throughout 2021. That’s good news for buyers who are already having to stretch their budgets to purchase homes at record-high sale prices.

As rates climb even modestly, it will be important for buyers to shop for the best mortgage and to compare multiple lenders, if necessary. In addition, buyers should focus on the fine print, checking to see how fees, which can vary widely from lender to lender, will affect their overall cost to purchase.

In addition, this is no time to dip into savings that have been put aside for a home purchase. With higher home prices and even modestly higher interest rates, buyers may find that they need more than they’d estimated to see their home purchase through to completion.

While prices are projected to remain high, some of the overwrought competition may subside.

Overall, a more stable market is good news for everyone and may help to take some of the pressure off of buyers who have been disappointed in the past by losing out in multiple offer situations. According to a poll conducted by Homes.com, the next six months should see both increased inventory and increased availability of homes at a variety of price points—good news for those who feared that they would be priced out of the market in their areas.

In addition, the poll found that more sellers were planning to make improvements to their homes before putting them on the market. That means that there may be more move-in ready homes in the pipeline during the latter half of 2021.

Whether you’re just starting your home purchase journey or have been frustrated over the past year, the time has never been better than now to sit down with your trusted real estate agent or broker and begin crunching the numbers for yourself. No one understands the changes and potential in your local market like they do, and no one is as qualified to help you make the decisions that lie ahead.

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