The first day of spring is on Saturday. In a year of real estate that’s been like no other, what will this spring market bring? Vaccines are rolling out and inventory remains tight, so what can agents expect?
Most industry professionals Inman spoke with painted a picture of a competitive market that only stands to get more intense as the weather gets nicer and more buyers come out.
Low inventory will continue to be an issue
“What I’m hearing is, everything is a fight,” Mony Ty, an agent with Coldwell Banker in Salt Lake City, Utah, told Inman. “I’ve never seen it like this.”
Ty, who largely works with architecturally significant luxury properties in the area, initially thought that more affordable, lower priced homes were the ones seeing the most market competition. But recently, a number of Ty’s $1 million-plus listings have received multiple offers — some at hundreds of thousands of dollars above asking.
“Inventory is low, and I think we might be the hottest market in the nation right now,” he said. “I think right now, everybody is getting multiple offers above asking price.”
The inventory shortage has become so much of a problem up in Minneapolis, Minnesota, that Hannah Smith, “executive real estate geek” with The Property Geeks Team at eXp Realty, said most agents have taken to helping buyers make offers on “coming soon” status properties sight unseen. Although agents in Minnesota aren’t allowed to show “coming soon” properties, there’s no rule against writing an offer on one.
“Right now, in Minnesota at least, we have a crazy shortage,” Smith told Inman. “Obviously that’s national too, but we’re seeing lots of homes being sold sight unseen. Off-market is kind of where it’s at right now for Realtors’ sake.”
There’s been some speculation that as more of the U.S. population gets vaccinated, more sellers will feel comfortable coming to market, which could free up some inventory. However, based on their conversations with sellers, both Smith and Redfin Chief Economist Daryl Fairweather told Inman that availability of vaccines seems to be a less impactful factor for sellers.
“I don’t think that’s a huge portion of homeowners,” Fairweather said. “I think most people aren’t selling simply because they can’t afford to buy again.”
“In all honesty, it hasn’t been a hot topic for most people I’ve been in direct contact with,” Smith said. “There’s been Realtors speculating that, you know, more vaccines that are given out are going to cause more people more comfort in selling, but I don’t know if that’s the top driving factor of whether people are selling or not. I think it’s just a matter of us as Realtors as well, getting out there and trying to explain, without coming across as a salesperson of course, how good they would have it as a seller right now.”
Mortgage rates and home prices may inch up even further
Since they bottomed out at the beginning of 2021, mortgage rates have been creeping higher, and are now nearly what they were one year ago, a potentially concerning point for homebuyers who have seen steadily increasing home prices over the last year.
Earlier this week, the Federal Reserve pledged to keep interest rates low until 2023. However, Executive Mortgage Banker at William Raveis Mortgage Melissa Cohn told Inman that rates could still continue to rise over the next several weeks, particularly in the wake of President Biden’s $1.9 trillion stimulus package entering the market.
“I think, unfortunately, you know, when the flowers are coming out of the ground, mortgage rates are coming out of the ground as well,” Cohn told Inman. “With the combination of, obviously, with the Democrats in the Senate, with a Democratic president, the fact that this massive stimulus bill just passed, and then there’s going to be so much more money put into the economy, that’s all inflationary. And higher inflation means higher interest rates, and now the markets are just anticipating with all the spending that is now happening that we’re going to see inflation.”
“It’s sort of a double-edged sword,” Cohn added. “We’ve got money going into the economy and that’s going to be great for people and more jobs will come back into the marketplace, but it will cause rates to go up. Now, I think that interest rates will go up this spring, but that once this fiscal spending package has been spent that we will see interest rates settle back down.”
The news of continued mortgage rate increases of course won’t be welcome to many homebuyers, but Cohn noted that buyers can still try to offset higher rates by exploring options like adjustable rate mortgages and purchasing points to lower their rate.
Unfortunately, home prices will likely continue to rise into spring as well, Fairweather said, particularly as consumers have to largely remain in a holding pattern as the pandemic continues before using their dollars elsewhere.
“We report out weekly data on national home price growth and it just keeps setting records every single week we report it out,” Fairweather said. “And we’re not even into full spring selling season, so maybe we’ll keep breaking records.”
“I think [how long prices continue to rise] also depends on when things more generally get back to normal,” she added. “I think that once people have options to spend money on things besides housing, people will choose renting as opposed to buying a home. You know, spend their money on vacations and things like that. But, I think for the spring selling season, it’s going to look a lot like it does look right now.”
Even New York City is seeing renewed activity
For a long time, New York City was the epicenter of the pandemic in the U.S., and the trauma inflicted on the city caused palpable damage to the real estate market. As people reevaluated their lives, many New Yorkers left the city for more spread out suburbs, or entirely different states. The real estate market slowed to a crawl, prices dropped, property owners took apartments off the market, and some developers started selling condos in bulk at discounted prices.
But now, things are starting to pick up again, agents in the city told Inman.
“The market has really turned on a dime,” Michael J. Franco, a broker with Compass, told Inman. “There is just a ton of activity … I mean, I had listings that started during the pandemic, you know, stuff I’ve had on the market for a very long time that hadn’t sold, which have now sold.”
Franco added that with more and more contracts being signed every month, and even the resurfacing of bidding wars, he wouldn’t be surprised if an inventory shortage was on the horizon for the city after its prolonged market lull.
“I have a positive outlook for sellers for the spring,” Franco said. “And unless we get more inventory, I think it could be a little frustrating for buyers, because I think people want to buy — I think they are feeling confident about New York again and the interest rates are so low and prices have come down, so that’s like the perfect storm for people to come back in. So, I think … we could have a little bit of an inventory shortage.”
After getting through a tough fall season, Lisa Chajet, a broker with Warburg Realty, told Inman that she finally started seeing movement again in December, which seems to be launching her into a rejuvenated spring market.
“It’s just been nonstop since then,” Chajet said. “I mean, I listed a property last week, and we have six bids.”
After a “deep, dark winter,” Chajet said there’s renewed energy in the city and the market is moving again, albeit at lower prices.
“I find that, like, I’ve been showing people things that have been on the market a while and the apartments have taken a pretty big price drop and there’s multiple offers out there, which is kind of amazing,” she added. “I put things on for six and eight months, and then the broker dropped it, and all of a sudden, there’s crazy movement.”
Agents have to be savvy and creative
Dwindling inventory in Montgomery, Alabama, has spurred Jeremy Kelly, broker at Kelly Realty LLC, to help his agents try to think outside the box when presenting offers on properties. From presenting offers sight unseen to waiving contingencies to writing seller love letters to showing homes late into the night, Kelly said his agents are doing whatever they can to help their clients win bidding wars.
Over in Birmingham, Alabama, Kelly said he knows of buyers that are even contributing cash above a property’s appraised value.
“We’re having to get really, really, really creative in how we present offers and how we best try to angle, to position our clients to have the best chance to win the bidding war,” Kelly said. “Because literally, if it’s priced right and the condition is right, we’re seeing multiple offers within 24 hours. So as a broker, our job is to continue to equip our agents and study outside markets as well that might be doing a little bit better, or a little bit hotter than us, and try to bring those tactics back to Montgomery so that our agents can, you know, thrive and stay ahead of the curve.”
Fairweather told Inman that this is the strongest sellers market seen in the country since 2006, and it doesn’t look like it will get any better for buyers moving deeper into spring.
“I think that buyers are going to have a rough time,” she said. “I don’t really know how to sugar coat it another way.”
Fairweather recommended agents stay on top of knowing what kinds of offers are effective for the specific kinds of properties their clients are looking at in their market.
“[Be] really in tune with what seems to be winning offers in your local market to give you an edge, and then educate your buyer on that so that they don’t get worn out after losing offer after offer. They come in the first time, and they can offer with an offer that’s really strong and has a good chance of winning.”