Spring 2021: A Seller’s Market
What is causing the seller’s market in the Bay Area and beyond?
In short, there is just not enough inventory out there, but let’s break it down a little more. The demand is created by multiple factors, however, the most common tend to be: historically low interest rates, COVID-19 pandemic, and migration from cities to suburbs. Good news for homeowners… there has never been a better time to sell. With homes often selling for over asking price and with multiple offers, many are cashing out on their investment and taking advantage while the market is hot.
1. Historically Low Interest Rates
Rates may have gone up in recent weeks and hovering around 3%, however they are still historically low. Compare this to mortgage rates at 4.84% in 2011, 7.8% in 2001, and almost 10% in 1991. This ultimately means more people are able to afford a mortgage payment now than perhaps 10 years ago. The prediction is that rates are going to continue to rise throughout 2021 as the economy stabilizes once more people are vaccinated and states lift more restrictions. There is a saying “strike while the iron is hot”… the iron is certainly hot right now and people are trying to get approved so they can buy a home before rates start to increase. To learn more about getting pre-approved and today’s interest rates, reach out to Rick Olson at Commerce Home Mortgage.
2. COVID-19 Pandemic
There is no question that the COVID-19 pandemic plays a strong role in demand the real estate market is currently experiencing. Because many people are now working from home either indefinitely or a hybrid schedule, they are commuting less days into the office. Many are finding the need to set up a home office. Additionally, some children are still remote learning. Families are finding their current spaces just don’t work for their new needs as they are no longer able to accommodate their family and work/school life.
3. Shift to the Suburbs
Due to the pandemic, work culture has changed at many companies which means less people are commuting. Living further from the office has definitely become more appealing. This appeal combined with the need for more space drives demand higher to live in the East Bay suburbs. Buyers realize they can get more for their money the further they live from Oakland, San Francisco, and Silicon Valley. Less time in the car means more time spent with loved ones.
What Does This Mean for Buyers?
It is really tough out there for buyers right now. More buyers are looking for homes because of low interest rates, creating a huge demand. However, due to the pandemic, many buyers can’t get in to see a home before offers are due. They are often times in competitive multiple offer situations against buyers who are waiving contingencies in order to make their offer stand out.
Appraisal, loan, and inspection contingencies are there to protect buyers. Without them, buyers can often end up losing their deposits, paying more out-of-pocket, or get in over their heads on a poor investment. Your real estate agent shouldn’t recommend removing contingencies until they are sure you are educated on the dangers of removing them. There are other ways you will stand out as a buyer. You can have your pre-approval letter ready, proof of finances ready with account numbers blacked out, and know what you want! You may not have time to waste or even the opportunity to view multiple houses. Knowing what your must haves and deal breakers are in advance will help with the buying process.