By Hazel Emlen
One of the hottest topics nationwide right now is real estate. Some of the big questions people are asking out there are: How is our real estate market doing? Is it a good time to sell? To buy? How are the interest rates? If you were to ask any real estate professional in any part of the country these questions, the answer, I bet, would be remarkably similar. There are just not enough homes for sale to meet the extreme demand.
Whether you are in a big metropolitan area like Houston, Texas, or in a smaller area, like a suburb or rural community, the sentiments on the real estate market are the same. In short: Low supply and high buyer interest. This makes for a seller’s market. It’s important that real estate professionals understand the factors driving the incredibly strong demand and lack of inventory. Here are three of the most common that I’m seeing.
1. Historically low interest rates: The interest rates are still incredibly low, which is encouraging new and repeat buyers to take advantage of this market. Just a couple of years ago, interest rates were close to 5%, and those rates were historically low back then compared to years past. But now we are seeing interest rates in the 2% to 3% range. Who would not want to take advantage of a market with those rates? Your clients could save thousands by investing now instead of waiting. This is a major reason why so many people are flooding the market looking to buy. Our buyer clients want to lock in that low interest rate for potentially the next 30 years. Plus, the lower rates increase the spending power of some borrowers.
2. The coronavirus pandemic. There is no question that COVID-19 is another strong force driving the insane demand we’re currently experiencing. With a large number of people now working from home—in some cases, permanently—many buyers are now in need of a place to set up an in-home office. In addition, because many kids are still in remote schooling, families are finding their current spaces cramped. Their homes are no longer able to accommodate their family’s needs, so they’re choosing to upgrade to larger houses that offer them more space.
3. Migration to suburban areas and smaller communities. Many people choosing to move from bigger cities to suburban, rural, and resort/second-home areas. We’re seeing this in the Bay Area and Silicon Valley. Due to the realities of the world we’re in, people just don’t want to pay the high price of living in a big city such as San Francisco. With many companies now allowing their employees to work remotely, there is less reason for people to live in the city. Plus, consumers just want more space.
A large number no longer want to commute or use public transportation due to COVID-19. Prior to the pandemic, droves of people were heading to the city to avoid a commute. The time they saved was time they could invest elsewhere—often with families. But the tradeoff was higher-priced housing. I remember hearing stories in California’s Silicon Valley about owners renting out tents in their backyard because the demand for cheaper housing in the tech areas was so high and so hard to find. Now, with the ability to work from anywhere, people are now seeing the value of buying a home with more space further away for a fraction of the cost.
So, what does all this mean? Well, in short, the extreme demand in our markets is making it a tougher time for buyers. The lack of supply has made it extremely challenging for our clients. We are seeing multiple offers on many homes with incredibly competitive terms. Many times, buyers are removing contingencies, coming in with appraisal guarantees, putting in escalation clauses, and offering well over the listed price just to have a shot.
Real estate professionals should educate their buyers on what to expect, and let them know that it’s vital to have their ducks in a row. They must have a pre-approval ready to go. Now more than ever, timing is everything. Although this market is competitive, it can be a great time for your clients to get into a home. Your job is to help them compete as best you can. Understand your local market and what it takes to get your clients’ offers accepted.
For sellers, there has not been a better time to list their home. Buyers are making incredibly competitive offers. In some cases, I have seen $50,000 to $100,000 offered over the asking price, with all contingencies removed. People are willing to pay a high premium to secure a home. If you’re explaining the benefits of selling to potential clients, let them know that now is the time to take advantage of this hot market.
In closing, our current housing market is still going strong with many factors playing into the extreme demand. This market continues to be a seller’s market and most likely will remain that way in the months ahead. It will be interesting to see where the market will be at the end of 2021.
Hazel Emlen is a real estate agent with Rapisarda Real Estate in Vacaville, Calif. She was recently named a REALTOR® Magazine 30 Under 30 class of 2021 honoree. Emlen has been featured on “The American Dream,” a national TV show about lifestyle and real estate. In her spare time, Hazel also enjoys hosting her own podcast “Real Life & Real Estate.”