The COVID-19 pandemic has affected numerous industries. One of the sectors severely hit is real estate. With headlines and reports being published left and right, it can be hard to make sense of what’s truly going on with the real estate market. Furthermore, it’s difficult to discern the things that every real estate investor, home buyer, and home seller must watch out for in 2021.
We took a look at the latest reports on the real estate market’s performance in 2020. Let’s see what this data can tell us on what to expect for this year.
Decreased Home Inventory
There were just over a million homes up for sale in December last year. This is the lowest recorded number in a long time and is a 23% decrease compared to previous years. The National Association of Realtors has tracked this metric since 1982, and the pandemic has indeed dealt a massive blow to the real estate market.
With a lesser amount of houses available to buy, the demand for housing has increased drastically. The National Association of Realtors charts the housing demand during the pandemic to be at its highest since 2006.
Sales began climbing after the massive drop in March and April early last year. The number of closed sales in December was 22% higher than the same month’s sales performance in 2019.
Over 5.64 million units were sold at the end of 2020. This number exceeded any of the predictions set before the year began. It seems that the global pandemic elicited strong reactions from homebuyers.
Due to the pandemic, we’ve also seen schools, offices, and other public spaces closed. People started working from home. This new normal drove people to purchase larger homes in suburban areas in order to have dedicated spaces for rest, school, and work.
We believe that sales would’ve been even higher if there were more houses up for sale on the market, and project that over 7 million units would have sold last year if there were more homes listed, matching an all-time high seen back in 2005.
Increased Home Prices
The law of supply and demand states that supply is inversely proportional to demand. The low number of properties available for purchase and high consumer demand can only lead to increased home prices.
The median price for a home sold in December comes in at a whopping $309,800. If we compare this to historical data, the average price has increased by 12.9% compared to the cost of houses sold back in December 2019.
Simply put, there’s a strong surge in demand for houses, especially in suburban areas. The supply, however, is not enough to cover this demand and has skyrocketed the prices.
Lower Interest for Condos
Total condo sales in 2020 have dropped compared to the sales in 2019. This drop signifies the lower demand for condominium units. In contrast, single-family homes have experienced a higher price growth since more consumers now prefer a more permanent housing situation.
Despite that, multifamily units are still a lucrative investment to have. The demand for single-family houses is projected to be short-term, and high house pricing does not help. People will return to condominiums once the pandemic tides over.
The real estate seller’s market is predicted to be strong in 2021 as the demand remains heightened and prices have hit new highs. Inventory gears to make a comeback, giving buyers relief, though increased mortgage rates and prices might make purchasing houses slightly more difficult.