2021 was a year unlike any other. Some businesses did well after being closed during the early days of the pandemic. Others, like the restaurant and service industries continue to struggle to find workers. Families resumed normal activities such as recreational sports, vacations and family get togethers. Air travel resumed and, in my case, conventions were back on for the first time in over a year. This month I will highlight some of the biggest changes of a year that still broke many sales records.
Homes for Sale
The lifeblood of the real estate business is to have homes to sell. It’s the crucial piece of the economic law of supply and demand. Little or no supply translates instantly to high demand. 2021 experienced its lowest inventory levels in at least the last 20 years. The highest number of homes for sale on a given date this year was 2,304 in October. The low was 1,643 in May. And those numbers included new construction inventory. Many of which were proposed construction, meaning that they were nothing more than bare ground listings.
Low Supply – High Demand
There is no better visual of what a low supply – high demand market looks like than the Inverted Market graphic.
In March of 2020, Covid 19 made its presence known. After about a month pause, the real estate industry realized it had a crucial role to play in the economy as people quickly discovered that they would be working from home for an extended and unknown period. Schools were closed and transitioned to at home remote learning. Suddenly the home that was the right size prior to Covid became much smaller as family members claimed their spot to begin working and going to school from.
This was the catalyst for demand that continues through today. A combination of record low mortgage interest rates added fuel to the fire allowing homebuyers the ability afford higher priced homes without breaking the budget. Prior to Covid-19, there had always been more homes available for sale than there were buyers. In June of 2020, that changed and the new normal began.
Sale Pendings Surge
By the end of 2020, it looked as though the Inverted Market was going to correct itself, however in January of this year, it proved to be only a pause and buyers were out the door going under contract at virtually every opportunity. The highest count of homes under contract had been around 3,600 in 2020. 2021 effectively said “Hold my beer” and we ended up recording just short of 4,600 homes at one point in June. This unheard-of record high taxed the entire real estate closing industry from appraisers to underwriters and closers as everyone scrambled to meeting contract deadlines.
Days on Market
The time a home spent on the market from listing date to offer acceptance was one of the end results of low supply and high demand. Since April, the median days on market was a week or less. It was common for a home to go live in the MLS at 9am and have multiple offers by noon. Several Realtors began employing the process of delayed offer presentations to allow more homebuyers into properties. Some argued that this simply drove the prices up by creating even more multiple offers, however the benefit was that home sellers ultimately ended up being able to choose a buyer with better financing terms or negotiated possession dates, which allowed the home seller the chance to find their next home.
Closed Sales and Higher Prices
The full effects of this kind of market will not be realized until we return to some state of normalcy – if that will ever happen. However, one thing is for sure and that is that we are experiencing record high numbers of homes sold in 2021 and along with that, record high home sale prices. We will end up closing very close to 18,000 home sales this year compared to 16,500 in 2021 which is a 9% increase.
Sale prices are where the biggest change occurred. With a Median Sale Price consistently $20,000 over 2020 prices, we are set to end the year at $250,000. Much of this rise in pricing was due to new construction sales and higher material costs.
With mortgage interest rates predicted to climb in 2022, we may have peaked on pricing this year, but buyer demand remains strong, even as we move closer to the Christmas and New Year holidays. My best advice to home buyers in 2022? Be ready to go as soon as you see that perfect home hit the market. Buyer demand should be pretty similar to the last 2 years.
This Month’s Graphics
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~Les Sulgrove, Vice President
VIA Group REALTORS
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