This past year has seen a surging real estate market – home prices have continued to climb as Americans navigate the ever-changing dynamics of the pandemic. A recent report released by Realtor.com shows that, on a national level, median home listing prices in March 2021 were $370,000 – 15.6% higher compared to the year prior (March 2020). Prices in the largest U.S. metro areas “grew by an average of 12.1% year-over-year with some markets seeing listing prices grow by nearly triple that amount.” Research indicates that this is an all-time high for the American housing industry.
Not only have home values spiked, but the home sales timeline has been tightening as buyers frantically pursue investment opportunities. According to Realtor.com, “Nationally, the typical home spent 54 days on the market in March, 6 days less than the same time last year.”
What is contributing to such high home prices?
Analysts reporting on the housing market are baffled by the ongoing trends we see across the county. However, various market and economic factors have contributed to inflated prices. Here’s what we’ve experienced.
Limited Inventory in All Major Markets
Active inventory has dramatically declined since 2020. In March 2021, 52% fewer homes were on the market compared with the year prior. Danielle Hale, chief economist at Realtor.com, clarified the findings: If buyers “had 10 homes in their price range to choose from last year, they have [fewer] than five, perhaps as few as three, available to them today.” She continued, “As a result, home prices have skyrocketed, shattering previous records.”
Many homeowners are responding to pandemic-related fears, holding off on their plans to move until post-COVID days, while others simply don’t see the value in selling because there is no available inventory for them to trade into. Whatever the reason, statistics prove that there is ongoing limited inventory across the board.
|Region||Active Listing Count YoY||New Listing Count YoY|
Surplus Buyers Create Immense Competition
Last March, the Federal Reserve cut rates to zero in the hope of slowing the economic impact of the COVID-19 pandemic. As a result, prospective buyers raced to lenders to leverage low-interest rates and purchase new homes. However, when confronted with limited inventory, buyer bids commenced.
Now, more than ever, it’s a seller’s market. Stories about home sellers inundated with offers appear daily, with many submitting all-cash, non-contingent offers above the list price.
In Washington, D.C., the owner of an 1,800 square-foot fixer-upper received 88 offers for their home, which was listed for $275,000 in March 2021. Of those, 76 were all-cash offers, and 15 were made sight unseen.
Meanwhile, the homeowner of a 1,400 square-foot home located in Citrus Heights, CA, received 122 offers within two days of listing the home. Marketed initially at $399,000, the home received offers above $500,000.
How does the California market compare?
Homeowners in California are also enjoying the extraordinary market conditions. Home prices in most major markets have soared, while listing times have declined. Utilizing Redfin data, we analyzed California coastal markets to see how they compare with recent findings.
Unlike other areas, California coastal counties have seen an increase in the number of properties on the market. A primary reason has been California residents turning to out-of-state markets as working from home trends rise; many seek a lower cost of living. However, many California homeowners and investors are simply seeking opportunity, taking advantage of the numerous buyers willing to pay above-market rates for residential real estate.
San Francisco, however, responded differently to the COVID-19 pandemic. As businesses closed and residents sought more remote and spacious living conditions, median home sales declined year-over-year, and median days on market increased.
|County||Median Sale Price||Change YoY||# of Homes Sold||Change YoY||Median Days on Market||Change YoY|
|Santa Cruz||$950,000||+ 8.5%||201||+ 40.6%||32||– 15.8%|
|Sonoma||$717,500||+ 13.2%||482||+ 35.4%||36||– 8.9%|
|Marin||$1,400,000||+ 15.2%||255||+ 38.6%||23||– 17.9%|
|San Francisco||$1,400,000||– 4.8%||654||+ 63.9%||24||+ 33.3%|
|San Mateo||$1,500,000||+ 4.7%||552||+ 32.1%||13||– 7.1%|
|Monterey||$850,000||+ 36.8%||239||+ 8.6%||43||– 4.0%|
|San Luis Obispo||$742,000||+ 9.1%||39||– 2.5%||27||– 25.0%|
|Santa Barbara||$810,000||+ 35.9%||376||+ 34.3%||32||– 30.8%|
|Ventura||$720,000||+ 16.8%||666||+ 1.5%||34||– 26.1%|
|Los Angeles||$770,000||+ 16.7%||6,531||+ 26.3%||35||– 14.6%|
|Orange||$850,000||+ 13.3%||2,867||+ 20.0%||32||– 17.9%|
|San Diego||$700,250||+ 16.7%||3,038||+ 3.8%||8||– 50.0%|
*Data pulled April 7-9, 2021.
What should we expect moving through 2021?
While some economists predict that we are in a financial crisis, others anticipate that, as life begins to return to normal, the real estate market will continue to flourish.
One pending concern relates to the potential impact of lifting the ban on evictions on California’s market. What will happen when the moratorium ends? Will we see an influx in homes hit the market? Or will the California market continue to thrive, despite rising unemployment rates?
Additionally, property owners may experience a shift in buyer attention as interest rates begin to rise. As of March 2021, the Fed took no action to raise rates. Yet members foresee rate hikes in the coming years, which could reduce the number of buyers interested in the real estate market.
For now, sellers are in an optimal position to transact, as today’s market continues to make history. Homes are trading at record highs, creating a unique opportunity for homeowners to pursue new avenues.