Real estate trends have been a bit unexpected, starting with the pandemic, and continuing through 2021. While there was early caution over COVID-19 slowing real estate activity, demand in many communities has risen. At the same time, economic uncertainty kept many homeowners in place, especially those that refinanced with historically low interest rates, creating a shortage in inventory. Supply chain woes slowed new construction. Yet, people continue to look for new homes, with high demand expected to continue, even as interest rates rise. Lets take a look at state and local data over the past year.
When the home buying process gets to the point of a serious offer, it is kind of an exciting thrill ride of ups and downs until closing. One of the big variables that can throw a monkey wrench in the works is when the appraisal comes in lower than the accepted offer. This can leave a seller feeling like they paid more for a home than it’s worth, or they must scramble to make up the difference with extra funds or the deal may fall through.
Right now, appraisals are based on comparable sales that closed when prices were lower. In a rising market, comps can’t keep up with home sale prices in a competitive market, so values may be lower than expected. If you have a gap between your loan amount, you may be asked to come up with a larger downpayment.
But don’t despair, you have several options:
Baby boomers are seeking a simpler life and an easier to take care of home. However, this means moving into a lower priced housing market traditionally sought by young families. In an already fiercely competitive market, this makes home buying a challenge for everyone—boomers, and younger buyers alike.
Nearly 78% of all home mortgages created last year were for a 30-year term, according to the Urban Institute. But have you ever considered a 20-year term? A shorter term will save tons in interest payments, and you will build equity faster and be mortgage free sooner, even though you will pay a bit more monthly. New proposed legislation could help first-time homebuyers reduce the cost of a 20-year mortgage or provide down payment help.
Here’s what you need to know if you’re considering a 20-year mortgage:
Many elements went into creating our current strong seller’s market, but things could shift towards buyers in the future. This year, high buyer demand coupled with low inventory elevated home prices and continues to cause stiff competition when new listings hit the market. Overall, new home construction hasn’t kept pace with demand for the past decade. It didn’t help that the lumber industry was severely affected by the pandemic, driving up home building costs. When you look at all the factors, we are likely to see a seller’s market remain so for much of 2021. But, there are certain aspects that could turn the tides and make it a more favorable time for buyers.
If you are in the market for any type of wood—from plywood or sheeting to standard 2x4s, be prepared for a massive sticker shock. U.S. lumber futures contracts for May 2021 delivery were priced at $1,645 per 1,000 board feet, about 60% higher than they were a month ago and 374% above the $347 contract price average in May 2020. This marks the fastest rise since the housing boom that followed World War II.
With a shortage of inventory of homes for sale in pretty much every U.S. market, the construction industry had risen. But with lumber prices soaring, starts are well below their previous highs.
While a public health crisis gripped the country for the last year, the housing market for some stayed red hot. Most areas of the country remain in a solid seller’s market. Homeowners have seen their home values appreciate and equity grow. Housing inventory was already down at the beginning of the pandemic, and remains low. However, demand remains high. Not everyone was hurt bad enough by the downturn in the economy to hold off buying a home. With historically low interest rates throughout the year, there have been plenty of buyers ready to snap up just about anything that appears on the market. At the same time, people that want to move, especially those looking for affordable housing, are having a difficult time, because there are just not enough homes for sale.