Broker Associate at LIV | Sotheby’s International Realty based in Breckenridge, Colorado.
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In March 2020, when the pandemic hit and the country was set for a lockdown, the real estate market had a brief plateau and questions flooded the industry. Business closures and job cuts led experts and professionals to predict that an economic and real estate market crash was upon us.
It quickly became clear that those predictions were not correct and that we were in for an incredible boost in the industry. As companies started to announce solid plans for employees to work from home, some indefinitely, the demand for properties in secluded and resort areas like the one I serve boomed very quickly. On top of that, interest rates have stayed at all-time lows.
It is now clear that we were in for a different crisis than anticipated: the crisis of low inventory. Although most of the country continues to be a seller’s market, not many homeowners have realized what a historical opportunity this is to fetch top dollar for their properties. We are experiencing a “name your price” market. But while the following cocktail of favorable factors has allowed for property values to sharply increase, in reaction, would-be sellers are having a hard time letting go of their properties as it can be hard to see signs of a slow down.
1. Demographics
According to the Pew Research Center, there are now more millennials than members of any other generation. With work from home and the attractiveness of homeownership versus renting, it is clear that the demand from millennials for home purchases is here to stay for the next seven to 10 years. Millennials are not the only ones looking; many baby boomers also desire to purchase in a place they want to retire. Baby boomers also had access to low interest rates on past home purchases and are known to be the demographic that have held properties for the longest.
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2. Development
The real estate crisis of 2008 is still a fairly fresh subject for many, especially for homebuilders as housing starts declined. This has created a unique situation for property owners who desire to cash-out their equity and upgrade to a new home, but in some markets are unlikely to find anything desirable for sale.
3. Rentals And Innovation
The last decade’s technological advancements have offered an attractive opportunity for those who own investment properties to cut out the middle man. Online rental platforms such as Airbnb and VRBO allowed for anyone to easily rent and manage property and maximize earnings. With this in mind, both buyers and homeowners felt that investing was the right course of action as they gained the tools to generate income from such properties.
4. Low Interest Rates
Record-low interest rates have allowed buyers to access a budget that is substantially higher than it would have been a few years back. Additionally, buyers are finding that buying a property at the top of the market, one that accommodates their new work-from-home lifestyle, is an easy decision amid such cheap financing rates.
Interest rates are not only in favor of buyers but are also allowing property owners to refinance properties and keep costs low. The confidence from both buyers and sellers has further contributed to the current low inventory crisis.
Now Or Later? A Seller’s Quest
Every crisis has a counter-side, which today is the incredible opportunity of this unique market. If you are asking yourself whether this is a good time to sell your home, my answer is a definite yes. Things are changing and while it is may not be readily apparent, there is an indication that we will see a slight shift in the market — and soon.
New-development constructions are climbing and will offer access to boomers looking to secure a new retirement property as well as to millennials looking for a move-in-ready property. This will increase the inventory of older properties. Additionally, interest rates are beginning to slightly but surely climb. Tax season is also upon us and it is not fully clear how items from 2020 such as investment allocation, grants, unemployment and forbearance will affect the home-buying power in 2021.
While property values are still on a slight rise, we can only make a future assessment by looking at data. However, considering that the last three years have been a result of unconventional factors, there is probable room for error.
We can surely predict that the alignment of all the factors that made last year one of the most aggressive seller’s markets in history is unlikely to reoccur any time soon. Selling now, especially in the resort markets, may allow for asking a price above market value and maximizing net returns.
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