August 2021 – If you’ve been following real estate news, you’ve read much about the craziness of the current sellers’ market. Most homes for sale are going under contract within days, not weeks or months. And bidding wars are commonplace in more than just the hottest of locations. Prices have risen beyond sellers’ wildest dreams. Such movement is never sustainable and somewhere a balance between buying and selling will come into play. Here are some trends that may help you navigate your next moving decision.
Buyers Are Backing Away from Inflated Pricing
Agents throughout the country are reporting that many buyers are backing out of contracts because of regret over purchase price agreements. This has been more problematic in northeastern and mountain regions, however, over 44% of agents in all regions who participated in the Summer/Fall Top Agents Survey, conducted by Homelight, reported seeing evidence of the same. This is an indication of a market that is ready to put a limit on how high they’re willing to go.
Bidding Wars Are Waning
The percent of agents reporting a rise in bidding wars since 4th quarter of 2020 decreased from 52% to 37%. Agents who said bidding wars were at their peak increased from 42% (since 4th quarter 2020) to 54%. These same agents believe that bidding wars are hitting a ceiling as an increase in buyers would rather throw in the towel than prolong frustration by losing out to other bidders.
New Construction is Restrained by Volatile Lumber Prices
The National Association of Home Builders reported that the price of lumber surged 250% in the year leading up to spring of 2021. This has led to a moving target purchase price for new homes as lumber prices for the builder changed daily in May. Many buyers have forfeited hefty deposits as they no longer could afford the changing price of their under-construction home. The lumber situation has scared off many buyers from new construction.
Cash is Still King Compared to Mortgage Buyers
With mortgage rates still hovering in the 3% range, a record low, many buyers are in a race to lock in a specific rate in order to afford a home. Sometimes even a .25% increase can ruin a buyer’s chances of success, particularly if they are under contract. This creates a nervous situation for both buyer and seller in the transaction. As a result, cash buyers are more attractive in a bidding war, even if their bid is a little lower than someone who requires loan approval.
Home Owner Fear of Missing Out May Continue to Increase Supply
Many of the new listings coming on market are sellers who want to ride the high demand wave and get the highest price for their home while the getting is good. Nearly half of agents surveyed by Homelight believe that sellers who want to cash in on the housing demand will continue to increase the supply of homes this fall. Notably, a big segment of this group of sellers are the “almost-retired.” Instead of waiting until retirement a few years down the road, they’re boosting savings earlier while the market still favors sellers.
Real Estate Term of the Week
Balanced Market: A term used to describe whether or not supply is meeting demand in the real estate housing market. If a region’s housing market is balanced it means that there is enough demand from buyers to equal the supply from sellers.