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Real Estate Market Trends – August 2021
Recently, the National Association of REALTORS(r) released the July 2021 Existing Home Sales Report.
Here are the key takeaways about the real estate market:
- Existing home sales (units) are UP 2% compared to June, with all regions of the U.S. showing gains
- Months supply of inventory remains at a very low 2.6 months
- Days on the Market for listings sold remains at an all-time low of 17 days
- Median Sales Price is UP 17.8% compared to last year
Lawrence Yun, Chief Economist for NAR, shared:
Although we shouldn’t expect to see home prices drop in the coming months, there is a chance that they will level off as inventory continues to gradually improve.
You can view Mr. Yun’s 4-minute synopsis of the real estate market here.
Let’s take the recent data and answer the two most common questions I hear from the general public:
- Are we in a real estate bubble?
- Has the real estate market found the top?
Are we in a real estate bubble?
As a quick review of something we’ve covered extensively in previous articles, the real estate market functions like almost all other markets – the relationship between supply and demand sets the price and the direction of prices.
- How Long Will This Last?
- Real Estate Market Trends – July 2021
- “How’s The Real Estate Market?” – Actionable Scripts for Every Scenario
- Creating Your Own Market – 3.17.21
- What Goes Up Must Come Down….Or Must It? Market Conditions – 3.1.21
Three things that continue to impact demand:
- Affordability – via low interest rates and stimulative monetary policy
- Demographic Trends – specifically Millennials in the peak home-buying years and Baby Boomers retiring, downsizing, etc.
- Net Migration – areas of the country where there’s a steady flow of people coming in
Two things that are impacting supply:
1. Lack of existing homes to sell – supply of inventory remains near a historic low of 2.6 months. While there are some initial signs of that beginning to ease with seasonality, many of the hottest real estate markets in the country (where net migration is a big factor) still have less than 1 month of inventory.
2. Underbuilding of new construction – as we’ve written about previously, the U.S. has an anticipated underbuilding gap of approximately 5.5 million units over the next 10 years. In order to fill that demand, builders would have to increase production by nearly 60% per year for the next decade.
If you’d like to dig in a little more on this, check out what Nuveen’s Chief Investment Officer, Carly Tripp, has to say about why this is not a bubble. Worth noting, Nuveen manages over $1.2 Trillion in assets and is one of the Top 5 real estate asset managers globally.
All of the above factors suggest that demand will far outpace supply for the foreseeable future.
Has the real estate market found the top?
The graph below of the Case-Shiller Home Price Index shows how quickly home prices have appreciated. Worth noting, just because they are going up does not mean that they are going to come down any time soon.
At the recent NAR (virtual) Real Estate Forecast Summit, projections for 2022 home price appreciation are currently 3.1%. Keep in mind, these are just estimates AND your market trends may vary significantly from the national averages based on the factors that impact supply and demand in your real estate market.
There are a handful of other things I’m keeping an eye on:
1. The psychological impact that COVID-19 variants have on people’s desire to make big decisions. Overwhelm often causes people to stall. If there’s a significant impact in schools, causing kids to have to do virtual school and, presumably, a parent/guardian to stay home with them, there’s less energy and brain space for big decisions like housing.
2. The number of sellers who list their house at a ridiculously high price and how that might skew the data for days on market, price reductions, etc. Is the incremental growth in inventory attributed to “real” sellers or to unrealistic expectations about what a buyer might pay. Read between the lines in your real estate market.
3. The impact that inflationary pressures have on the real estate market. Generally, investors rolling their money out of stocks and into the real estate market is a positive trend in an inflationary environment.
4. If/when international buyers are able to return to the U.S. Of course, this is largely depending on the global response to COVID-19. Currently, the U.S. is at an all time low for foreign buyer purchases.
5. The agents, teams, and brokerages who cut through the noise and use the above information to provide expert-level advice to their Clients. Now’s your time to shine.
Bill, Debbie, and the MEC Team
Copyright ©2021 “Existing Home Sales.” NATIONAL ASSOCIATION OF REALTORS®. All rights reserved. Reprinted with permission.
September 8, 2021, https://www.nar.realtor/research-and-statistics/housing-statistics/existing-home-sales
Copyright ©2021 “NAR Real Estate Forcast Summit” NATIONAL ASSOCIATION OF REALTORS®. All rights reserved. Reprinted with permission.
September 8, 2021, https://www.nar.realtor/events/nar-real-estate-forecast-summit