2021 is upon us, which means a fresh start for many and a new year for Real Estate. Here are the top 5 things to watch in our local market this coming year.
1 – Inventory
By and large, we’ve seen total inventory in our market decrease over the past handful of years, but it has NEVER been as low as it stands today. How Low? Well… 3,467 is the total # of Active Detached Homes currently showing in our MLS system for Maricopa County. Considering a population of roughly 5,000,000 that’s not very many homes for sale now is it. Historically, we would see around 20,000 or so, although those levels haven’t been seen for many years now.
Back in February of this year, we dropped to 7,000 Active Homes and were scratching our heads… cut that number by half and here we are now. WOW! Let’s hope some people who held out in 2020 bring those homes to market soon so pent up buyer demand can be satisfied.
2 – Mortgage Interest Rates
We entered 2020 with the average mortgage interest rate being about 3.75% and they decreased throughout the year to records lows we are seeing now… approximately 2.75 – 3%. Some economists think we will see rates move even lower before a slow climb back up, others feel like we will remain pretty flat and a few think we will rise gradually throughout 2021 to around 3.75% by year’s end. Regardless, it will be something to monitor as this directly impacts affordability & buying power as prices rise.
3 – The Stock Market
You might be wondering why this one made the list, but in certain segments, specifically the luxury market, the stock market’s behavior really affects the housing market. Those in the upper echelon have funds tied to stocks and a volatile stock market can mean less confidence to buy real property. Also, down payments in the higher price points are larger, which means funding can come from retirement portfolios. While the stock market is high at the moment, not everyone feels that will continue in the same direction. We shall find out.
4 – New Construction
There are a few reasons to keep an eye here…
- With the lack of inventory in the resale market, many buyers are trying for a brand new build. However, there are not enough New Homes to satisfy the demand either. While the number of building permits being issued are up, the lack of contractors & trades make it so new homes are taking longer to build. Instead of a 5-6 month timeframe, we are seeing many fall in the 9-10 month range.
- Prices of lumber really skyrocketed a few months back, which translated to builders increasing base prices overnight. As lumber has relaxed, those prices didn’t.
- Think the process of buying a new home is easier and you can avoid the bidding wars of resale? Think again… many communities have very few lots released at a time with a Drawing, Lottery, Electronic Bidding or other system in place to drive prices. When not in effect, the waiting list could be months long before an available lots presents itself.
5 – Could this be the Most Robust Market in 15+ Years?
While 2020 was a little unusual with the ‘cycles’ & seasons of real estate, due to COVID lulls, we still saw overall sales up from 2019. The forecast for 2021 is even brighter with predictions in the 7-10% range for an increase in total sales compared to 2020.
How is this possible?
- There is SOOO much pent up demand. Whether it be younger folks still living “at home” even well into their 30’s, those tired of renting, but have held on due to worries over a potential bubble bursting, which seems far from the truth or the people moving here in droves from all around the country along with new businesses that are offering higher wage jobs.
- Our local economy is diverse and thriving.
- Consumer confidence is strong.
- This year’s events have caused many to want a change in lifestyle.
- With more working remotely/online, that provides greater flexibility to where someone can live.
So long as inventory rises with people making the leap and jumping into the market, then 2021 looks like it may shape into one of the best years ever for local real estate. On a national level, the Phoenix Metro area is viewed as one of the top few markets in the country as well.