The real estate market has continued to soar in the early weeks of 2021. Prices are still climbing, but how much higher can they go?
Your window of opportunity in this market could be shrinking soon, so here’s what you need to know about what’s going on in our market right now:
1. Mortgage demand has dropped slightly.
Sharp gains in home prices and a slight rise in interest rates combined to weaken demand for mortgages in mid-January.
Although mortgage applications fell by 4%, they’re still 16% higher than they were at this time last year. The average loan size has also hit a record high of $395,200, and interest rates remain under 3%.
Even with decreased demand, the market is still in a fantastic place because…
2. Existing home sales are up, but new listings are down.
Demand for homes driven by the pandemic resulted in 2020 home sale numbers that we haven’t seen since 2006.
There were 5.64 million units sold in 2020, which was a much higher number than what was predicted even before the pandemic. Even with record-high demand and sales, low inventory dampened our potential a bit.“
Home sales could reach 8 million if we had more inventory,” said Lawrence Yun, chief economist for the National Association of Realtors.
While existing home sales are strong, new construction sales have taken a dip. Why’s that?
3. Builders are less optimistic because of higher building costs.
Just a few months back, homebuilder confidence was at an all-time high. Again, the pandemic-driven buyer demand resulted in more and more people choosing to build new.
However, builder confidence fell three points in January as the cost of lumber rose.
According to NAHB Chairman Chuck Fowke, who is also a homebuilder from Tampa, “Builders are grappling with supply-side constraints related to lumber and other material costs, a lack of affordable lots, and labor shortages that delay delivery times and put upward pressure on home prices.”
This means that new homes are getting even more expensive and taking longer to build.
What does all of this mean for you?
As long as demand remains strong and inventory stays low, home sellers are in a great position in our market. With these kinds of conditions, a quick sale with multiple offers is more of the norm than the exception.
With low mortgage rates continuing to fuel demand, an increase in rates could lead to an increase in inventory and a decrease in prices. Though, I’m happy to say that we’re a long way from there.
If you’ve even been entertaining the idea of selling your home at all this year, I invite you to follow this link to instantly calculate your home’s value in today’s market based on recent Northern Virginia/D.C. Metro sales:
Enter your address here to find out what your home is currently worth
If you have any questions about potentially selling your home, feel free to give me a call at (703) 328-3434 any time. I’m talking to both buyers and sellers around Northern Virginia/D.C. Metro every day, and I can help you make the right decision for whatever you decide to do.