Today’s real estate market has been invariably molded by the COVID-19 pandemic. Although it initially took a major hit, the real estate market here in the U.S. has rebounded quite significantly.
These four trends have influenced the real estate market more than anything:
Intense Competition Between Buyers
Due to the current real estate market being a seller’s market, there’s tons of competition between prospective buyers. In today’s market, the average home is receiving five offers, which is much higher than the typical number of offers.
The Housing Supply Fell Dramatically After the Pandemic Started
Various U.S. government agencies and private real estate companies track the number of new home listings on the U.S. real estate market. In April 2020, there were 6.6 million homes available on the domestic market. Immediately thereafter, the total number of homes listed steadily declined until reaching an all-time low of 3.5 million houses in August 2020, where it would stay until moving up to 4 million in November 2020.
After falling back down to 3.6 million homes in January 2021, the domestic real estate market’s home supply increased nearly every month through June 2021, the latest month that we have data for. As of June, the supply stood at 6.3 million homes.
In any economy, a decrease in supply will cause prices to increase, assuming demand for those goods or services stays the same. As such, the ever-dwindling supply of homes directly resulted in substantially higher prices for Americans who were on the market for a home.
A Seemingly Never-Ending Rise in Home Prices
As mentioned above, the domestic real estate market’s long-running drop in supply caused a substantial uptick in prices. In other words, real estate professionals might say that the U.S. market saw above-average home price appreciation in response to the COVID-19 pandemic.
Red Bell Real Estate, a subsidiary of Radian Group Inc., regularly publishes Radian Home Price Index data. From April 2020 to April 2021, the Radian HPI increased by a factor of 9.2%, making it the largest single-year home price index increase in history — not counting any data that’s been released since the COVID pandemic, that is.
Another real estate company’s home price index — this one is from CoreLogic, a financial services company that provides clients with in-depth property, buyer, and financial information — shows that average U.S. home prices rose a whopping 15.4% from May 2020 to May 2021.
Homeowners’ Home Equity Shares Have Increased, Too
People who buy homes without help from financiers — meaning lenders don’t have liens against their homes — have 100% equity in their homes. Equity can also be described in dollar amounts. If your home’s fair market value is $300,000 and you owe nothing on it, your equity in the home would be $300,000. If it’s still worth $300,000 but has an outstanding mortgage that you owe $150,000 on, you have $150,000 in home equity.
According to another CoreLogic report, the home equity of all American homeowners with mortgages increased nearly 20% from 2019 to 2020. This increase in equity has led to higher home prices now that homeowners don’t have as much incentive to sell their homes. People are more likely to put up their homes for sale in Central Florida when they owe money on them.