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Buying a home in the Philadelphia area? It might not be so easy. Homebuyers are facing a ton of competition. The United States has seen a ton of spikes in homebuying demand. Philadelphia is no exception.
The pandemic has been a big factor in these trends. Demand has soared, while supply has struggled to keep up, and has even fallen in many places. There aren’t enough homes on the market, and prices keep shooting higher and higher. These trends made up a large amount of 2020 and have continued and will continue into 2021.
These are the housing market trends that we may see in 2021:
- Increase homebuying demand from homebuyers.
- A small number of homes being available on the market.
- Slight trend upwards for mortgage prices, which have hit record lows.
- More people available to move due to a stronger economy and work-from home options.
It is clear that Philadelphia and many other areas in the United States were considered to be seller’s markets in 2020. That has been true in the beginning of 2021 as well, and this should continue throughout the rest of the year.
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In March of 2020, as we learned about the seriousness of the Coronavirus pandemic in the United States, the real estate market came to a standstill. The pandemic was a shock to everyone, to say the least. No one was prepared for people being shut away in there homes, and it took time to adapt. People questioned the stability of the economy during this time. This caused a crash in the short-term, and some pretty dramatic effects that we’re seeing as time goes on.
Continuing to be a Seller’s Market
It’s clear that most areas in the United States, including in Southeastern Pennsylvania, are seller’s markets. Alongside a huge demand is an incredibly small inventory of homes.
This huge spike in people looking for a home has not been matched by an increase in inventory. That is what has caused such a competitive market for buyer’s, and why that trend should continue throughout the rest of the year.
Mortgage Rates
Mortgage rates fell dramatically in 2020. They hit all-time lows over and over again. But, why was this the case? The answer comes down to the Coronavirus pandemic. As the pandemic became more and more serious, people became more and more unsure of the future. Specifically, people began to suspect that the pandemic would cause the economy and job market to both tumble, which they did. This caused people to stop buying homes, which caused mortgage rates to fall.
Freddie Mac took a survey and found that mortgage rates have been hitting record lows ever since the middle of 2020. These mortgage rates have hit a record-low yet again at 2.65% in January of 2021. Ever since they have been recording average mortgage rates, which has been since 1971, this is the lowest mortgage rate they have ever recorded.
These mortgage rates are still very low, despite seeing some slight growth recently. In April 2021, that rate had risen to a total of 3.04%. Many people are looking to enter the market and buy a home before the mortgage rates return to what they were before.
High Demand
Demand is always a huge factor in determining whether an area is a seller’s market or a buyer’s market. In almost every market in the United States, demand is sky high. With this many people looking for a home, and there being so little homes available, sellers are in a great position.
Homes on the market are getting sold faster now than ever before. This is a direct result of there being such a high demand. Because of this, homebuyers are having to put their offers in quickly and are being afforded little time to negotiate. Philadelphia is one of the many places where, currently, a listed home could fair as many as half a dozen offers by just the end of the week.
Nordada Real Estate has found that, on average, homes are being sold 6 days quicker in March 2021 than they were in the same month of last year. There’s no end in sight to the disproportion of demand and supply in the real estate market, so expect houses to continue to be sold in record times like this.
Low Supply
As of March 2021, home sales have fallen by 52% compared to the previous year. With this and a low number of prospective homes entering the market, the supply of available homes is incredibly low and shows no sign of rising too greatly. Considering how much demand has a risen and is continuing to rise as a result of the record low mortgage rates, it will be difficult for supply to catch up any time soon.
Low supply puts sellers in a great position. They know that potential buyers don’t have many options, meaning they have to pay listing price, if not higher.
Economic Growth
The economy suffered greatly during the COVID-19 pandemic. The restrictions put in place by each state resulted in a tough period for many businesses. This had a negative effect on many aspects of the economy, including the job market, meaning many were living with much tighter budgets that they would otherwise. Now, as businesses have adapted and the vaccines have been rolling out, the strength of the economy is trending up.
A big aspect of this is that the job market has opened up. In February of 2021 alone there have been 380,000 jobs created. Unemployment has fallen by about 6%. That’s half of what the unemployment rate was in April of 2020. Between a better economy and a strong job market, many more people are in a position to buy a new home.
More Working from Home
Working remotely was rare before the pandemic changed how industries work. As businesses adapted to the pandemic and became accustomed to virtual working, it became clear that many businesses could have their employees work from home permanently or in a hybrid-schedule. That has had a big effect on the housing market.
The biggest change that has resulted from remote working, in terms of real estate, is that there are now many people who don’t have to worry about their commute. Suddenly, “location, location, location” isn’t as important in real estate, at least in terms of how close someone is from their workplace. People are now looking for homes in different cities or even different states.
According to a survey conducted by Redfin in December of 2020, 67% of people buying homes have either already moved to a different city or would be interested in moving to a different city as a result of having the option of remote working.
A Rise in Median Home Prices
It’s easy to grasp why median home prices would be trending way up when you take into account all of these factors. The mix of low mortgage rates and the opportunities caused by remote working have led to high demand that such a low inventory just can’t keep up with, causing an inflation in home prices. Research from Norada Real Estate Investments found that the median home price in March of 2021 was $370,000, which, compared to March of the previous year, is 15.6% higher.
These high home prices very well may be here to stay. A prediction from the National Association of Realtors says that there will be a rise in median home prices of 8% in 2021. There appears to be no end in sight for the high demand and low supply of the real estate market, which points to a continuation of high prices.
Final Thoughts
For those selling a home in the Fort Lauderdale area, this is a great time. You will be in a great position as one of the few sellers with plenty of buyers. Expect the rest of 2021 to continue to be in your favor.
If you’re looking to buy a Fort Lauderdale home, keep in mind what type of market you’re buying in. When buying in a seller’s market, remember to be quick, avoid asking for contingencies, and make an offer that is at least the listing price if not higher.