High Prices, Low Inventory and Frustrated Buyers – Navigating the Spring 2021 Housing Market
As the housing market experiences record low inventory, buyers are becoming increasingly frustrated as they are losing out in multiple bid situations. There is further dismay among buyers as prices continue to rise. The latest data nationally shows there are only 1.03 million housing units available. This represents a 30% decrease from 2020. In a balanced market, there is 5 to 6 months of inventory. Currently there is only 2 months of inventory nationally. So, what is driving this tight market and what can buyers do to stand out in a crowded market?
Interest rates continue to be historically low. The 30-year rate according to Freddie Mac is 3.13%. Cheap money is increasing the pool of potential buyers which combined with low inventory is driving up prices and making it more difficult for them to have their offers accepted. We have also witnessed a major priority shift as a result of the Covid housing effect. Increased flexibility with working from home has allowed buyers to travel further away from crowded metropolitan areas in search of more space and amenities such as home offices, home gyms and outdoor space.
Several other contributors to tight inventory are the lack of new construction, millennial buyers increasingly entering the housing market and baby boomers aging in place at an increasing rate. As this confluence of factors create more buyers and less inventory, we are also seeing a knock-on effect. Current homeowners who might be interested in moving are deciding to stay put. They have either bid on homes and lost out growing frustrated or they simply see what is going on around them and choose to sit on the sidelines.
If a buyer wants or needs to buy a home in this tight market, what can they do to get noticed and have their bids accepted? For starters, they need to understand the specific market they are buying in and how that home has been positioned. Smart sellers are pricing their homes slightly below the likely selling price. This is driving a greater amount of foot traffic and resulting in more offers. Therefore, the buyers must be prepared to make bold offers.
It is said, “cash is king”. Yes, that is true but so is getting the highest price. Being able to be flexible on terms and outbidding the competition is what will win the day. One of the challenges home sellers face in this market is having their home appraise for the list price. If the buyer can bring additional cash to the closing and waive the appraisal, that offer becomes as good as cash. Also showing flexibility on inspections in the offer will give the seller more confidence in a smooth close. It is a challenging time for buyers but with the right strategy and perseverance, buyers can be successful as they pursue their dream home.
Coldwell Banker Residential Brokerage
211 South Street
Morristown, NJ 07960
(O) 973-267-8990 x153