Real Estate Hindsight is 2020

/ RE/MAX Advance Realty/

It’s a new year. Time to up our game and rise above. We are days away from a new President, our seniors are getting access to the COVID-19 vaccine and our housing market has stood tall in the face of strong headwinds. A little Monday morning quarterbacking will give us vision about our near-term future. And, I’m sure you’ll agree, we all can use a little positive vision at this point.

  • The Fed has pledged to keep buying bonds, which will support keeping our incredibly low interest rates right where they are. At the time of this writing, well qualified people can get conventional rates as low as 2.6%. That is a full percentage point lower than it was a year ago. During 2020, we set 15 all-time lows.

  • The nationwide supply of homes is at 2.3 months, meaning if no new homes came on market, everything would be gone in 72 days. That is the lowest inventory count recorded since the National Association of Realtors began tracking this metric in 1982. Comparatively, inventory is down 30% from last year’s levels.

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  • Due to low inventory and low interest rates, the nationwide home sale price rose 14.6% year-on-year. Locally, median sales prices grew 23% year-over-year!

  • The percentage of all-cash sales dipped to 29% from 35% in November 2019, an indication that fewer foreign buyers are competing with locals. But Miami-Dade still had the highest percentage of cash transactions in the U.S. The national percentage is 20%.

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  • Incredibly, sales volume on the higher end of the market ($750,000 to $1 million) were up 85% from a year ago.

  • Low rates continue to fuel refinance volume, so much so that loan applications are a stunning 124% higher than a year ago.

So, with all those facts, let’s look at where we can place bets in 2021.

In mid-December we saw a firming of rates, so it looks like we may have found the bottom of rates. 2021 may see rates tick up a bit, but with historically low rates, it is basically free money and people should be borrowing at a healthy clip.

I feel that many of the first-time homebuyers have already entered the market. These first-timers, flush with buying power, drove prices up. I believe that the maturing market will see that euphoria calm a bit. Housing affordability must come into play at some point and I would guess that the second quarter will show that.

Mortgage forbearance for existing homeowners currently has participation around 17%. This means that as lenders make adjustments in early 2021 to make up for missing months of paid mortgage prinicipal and interest, property taxes and insurance premiums, homeowners are likely going to see a dramatic increase in their monthly payment. This will likely lead to increased foreclosure rates and maybe even short sales in mid-2021.

Appraisers will be hard pressed to continue to write reports with rising home valuations. Even though the market will remain strong, one must realize that parabolic growth cannot be sustained. Therefore, we in the business should expect to start having deals fall apart because appraisals will not meet the contract price.

How can I make these predictions and have a decent track-record over the past decade? It is because I am a true real estate professional with staying power. According to the National Association of Realtors’ (NAR) 2020 Member Profile (an annual report that outlines members’ behaviors and characteristics over the preceding year), 17 percent of Realtors have less than one year of experience, 65 percent have only a salesperson license rather than a broker’s license, and only 80 percent were certain that they will remain active in the industry for two more years.

2021 is a year opportunity! I stand ready today and tomorrow to help anyone understand and take advantage of the real estate market. You can succeed and enjoy homeownership.