May 2021 Market Update

Introduction:

The real estate market has been experiencing significant changes in recent years, and it's crucial for both buyers and sellers to stay informed. In this market update, we will delve into the current state of inventory levels, average profits, and provide insights into mortgage rate predictions. Additionally, we will offer valuable advice for both sellers and buyers to navigate the dynamic real estate landscape effectively.

Inventory Levels Are Down: One of the key factors affecting the real estate market is the supply and demand dynamics. Graphics 1 and 2 illustrate the decline in inventory levels between 2020 and 2021. The year-over-year change in new listings compared to total listings reveals a concerning trend. The shortage of available properties has been driving up prices and creating a highly competitive market for buyers.

When Will Inventory Levels Grow Again? Graphic 3 presents an outlook on when inventory levels might start to rebound. While the timing remains uncertain, experts anticipate that the inventory shortage may persist in the near term. Factors such as construction delays, limited land availability, and increased demand contribute to this prolonged situation.

Average Profit Increased 26% to over $70,000 in Q1 2021: Despite the challenges posed by low inventory, sellers have experienced substantial gains. Graphic 4 showcases the impressive growth in average profits, which surged by 26% to surpass $70,000 in the first quarter of 2021. This rise highlights the opportunities available for sellers in the current market.

Not a Bubble, Simply a Lack of Supply: Contrary to concerns about a real estate bubble, Graphic 5 dispels the notion by emphasizing that the market's current state is primarily due to a shortage of supply. While prices have been increasing, the underlying reason is the persistent imbalance between supply and demand rather than speculative activity.

Mortgage Rate Predictions: Interest rates play a crucial role in the real estate market. Both sellers and buyers should pay attention to mortgage rate predictions. While we cannot predict future rates with certainty, keeping an eye on economic indicators and consulting with financial professionals can help inform your decision-making process. Understanding the potential impact of mortgage rates is vital for sellers and buyers alike.

Sellers: The Market Before School Ends: For sellers, it's essential to consider the market dynamics before the school year begins. Historically, the summer months have seen increased buyer activity as families strive to settle in before the academic year starts. Taking advantage of this heightened demand can maximize your chances of achieving a favorable outcome.

Squeeze the Opportunity: To capitalize on the current market conditions, sellers should focus on showcasing the unique features of their properties and staging them effectively. Professional photography, online listings, and targeted marketing strategies can help attract potential buyers and increase the chances of a successful sale.

Buyers: Inspection Thresholds, Appraisal Guarantees, and Freeing Up Cash: Buyers face a highly competitive market with limited inventory. To navigate this landscape successfully, consider the following tips:

1. Inspection Thresholds: Be flexible with inspection thresholds, prioritizing major issues rather than minor cosmetic concerns. This approach can increase your chances of securing a property in a competitive bidding environment.

2. Appraisal Guarantees: Work with your real estate agent to explore options like appraisal guarantees. These programs provide reassurance that the property's value will meet or exceed the purchase price, helping to strengthen your offer.

3. Free Up Cash: In a competitive market, having sufficient cash reserves can make your offer more appealing. Explore ways to free up cash by optimizing your budget, reducing expenses, or exploring alternative financing options.

Conclusion: The current real estate market presents both opportunities and challenges for buyers and sellers. Understanding the dynamics of inventory levels, profit growth, and mortgage rates is crucial for making informed decisions. By staying informed and leveraging the tips provided, buyers and sellers can position themselves for success in this dynamic market environment.