Is late 2021 a good time to buy a home?
Looking ahead to fall and winter 2021, there's evidence that the market is slowing down, and seasonality suggests that there will be less competition than earlier this year. Of course, home prices are still high nationwide. Though the market is shifting towards buyers, it’s still a seller’s market overall.
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Depending on where you are, you may have heard conflicting messages about housing market conditions this summer. The problem with predicting the housing market in a country as large as the United States is that national data doesn’t always reflect your local area.
In July, just 28% of consumers polled nationwide by Fannie Mae thought it was a good time to buy a home (compared to 66% that thought it was a bad time to buy). That’s down from 32% in June, and significantly lower than in March, when 53% of Americans thought it was a good time to buy.
That said, many real estate experts expect the record-setting housing market of the past year to slow down this fall. But even as the market shifts more towards buyers, it is still expected to be highly competitive.
Is the housing market cooling off?
So, is the housing market cooling off? There isn’t an easy, single answer. According to the Housing and Mortgage Market Review, there’s more than a 90% chance that home prices rise or stay the same over the next two years.
Despite that prediction, however, there’s evidence that buyer fatigue and a glut of available homes are slowing the market down. New listings are up 4% year over year and the share of homes that lowered their price had risen for 15 consecutive weeks to 4.9% by the end of August. Additionally, homes are staying on the market for a median of 17 days, a longer time than when the market was at its hottest in March.
These trends show a market that is shifting towards buyers. At the same time, home prices still remain high and some buyers still experience bidding wars.
Still, as the market normalizes, there are pros and cons for both buyers and sellers.
Is now a good time to buy?
It’s hard to imagine a worse time to buy a house than in early 2021, when supply was tight and houses were selling for well over 30% of asking price across the country. In that sense, if you had been thinking about buying a house in April but held off, now is a much better time to buy.
Fall also tends to be a less busy home buying season than summer. Usually, the market begins slowing down as most families with children want to get into a new home before the school year begins. But with a larger home supply on the market, mortgage rates still low, and more millennials hitting their prime home buying years, you may find that certain markets will remain competitive in what is ordinarily a good time to buy.
Finally, mortgage rates continue to be at all time lows while rental prices are increasing nationwide, making home buying a potentially attractive option for current renters. While the housing market may not have cooled off enough to suggest it’s a buyer’s market just yet, it’s better than the spring.
What should buyers do now?
Everybody is on a different timeline and only you know when the right time to buy is. Although it’s a better time to buy than the springtime peak, you should still expect a competitive marketplace.
Make sure you’re fully prepared for the experience by getting a mortgage pre-approval to understand what you can afford and stick within your budget while searching. You might find your dream home at the top of your budget — but if you’re not the highest bidder, you could waste time and energy on a fruitless battle to buy a house you can’t afford. If you’d like, hiring a real estate agent can help you through the complexities of buying a home so you can find the best value in your preferred location.
Is now a good time to sell?
While home prices are projected to stay the same or increase, the growth rate will be less than what we’ve seen the past year. The median home sale price in Q2 2020 was $322,600. In Q2 2021, it was an astounding $50,000 higher at $374,900. Even if prices increase as expected, you shouldn’t assume you’ll be able to sell your home for an extra $50,000 if you wait a year.
Redfin data shows that in June, 65% of home offers faced competition, down from a peak of 74.1% in April. It’s much higher than the 56.8% rate in June 2020 but it’s trending in the wrong direction as more sellers come to the market. That means you’re less likely to start a bidding war in which your house sells for far above asking price like it might have a few months ago.
Despite some balance returning to the market, however, things are still tilted in sellers’ favor. Median home prices remain 20% above the level they were last year and still sell in an average of 17 days. Even though home buying demand has slowed and supply has increased, it’s still a seller’s market.
What should sellers do now?
You may have heard the term “housing bubble” thrown around. Don’t let it frighten you into putting your house on the market just to maximize the sales price. As we’ve mentioned, housing prices are still expected to rise for the next couple of years.
That said, demand is trending downward so if you have been thinking about selling your home, now is a good time to put it on the market before the winter market slows down demand even further.
Whether you’re looking to sell immediately or within the next year, you should be prepared for a market that isn’t quite as blisteringly hot as you’ve heard in the news. Stay patient and understand that your home might be on the market for a while before getting any serious offers. Likewise, be willing to adjust your price. You can start high to see if there are any bites but with less demand, savvy house hunters won’t stretch to meet it. Houses don’t sell for 30% over asking price very often anymore, so it’s better to keep your asking price at a number that will attract offers.