While the Real Estate Frenzy of 2021 appears to be on its way, there are reasons why it could be muted, or not happen at all. Here are a few:
Lack of Inventory: Our recent history of fewer homes for sale is likely to continue. It’s not getting easier to move – and most will say it’s harder than ever to sell your home and buy another one around here (you need to leave town to really make it worth it). If would-be sellers get discouraged and decide to pack it in instead, the frenzy will get whipped up but not sustain without a continued flow of product. A real frenzy needs momentum, which will be more detectible if we have 10% to 20% more homes come on the market like I predict.
Rates Go Up: It’s unlikely the Fed will do much, if anything, for the next 1-2 years. But al we need is for rates to get back up into the mid-3s and buyers are going to cool off quickly. They already don’t like these prices, and they will insist that any rise in rates should be accompanied by lower prices – and they will at least pause for days or weeks to see what happens.
List Prices Go Nuts: The most-likely deterrent to a frenzy will be the jubilant over-confidence of sellers who aren’t happy enough to have picked up ANOTHER 5% to 10% appreciation in 2020 – and insist on packing another big lick on top of that.
Cocky Agents: I had one on Sunday refuse to show her listing after two days on market – she already had enough offers. I guess we need to understand that some agents can’t handle a full load, but it’s the surly attitude that comes with it that wears people out. It is a confidence that prevails throughout the industry, and when buyers tire of it, will agents notice in time? Doubtful.
Buyer Exhaustion: There will come a point where some buyers will give up.
Craziest Buyers Already Bought: Just because we had a frenzy in 2020, doesn’t mean it will continue. It’s always different players every year.
Vacations Resume: Those who value a great vacation probably skipped one this year, so they will make up for it this summer.
As the threat of Covid-19 diminishes, so do the reasons for moving: For those who were moving to improve their pandemic environment, will they still need to move once the pandemic goes away?
The potential 2021 home sellers would be smart to get a jump on it and sell in February or March, just in case the frenzy turns into a glut. You might leave a couple of bucks on the table if the market around you evolves perfectly and nobody else lists their home for sale. But if a few neighbors try to get out right when you do, the competition could turn into a price war (it’s a fine line).
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