5 Ways to Know Where Real Estate Is Headed
No matter where you are at in your journey as a homeowner–applying for a mortgage, refinancing, or selling—it’s always smart to understand the real estate market.
The more informed you are, the better position you’ll be in to negotiate, get great rates, and save a ton of potential frustration.
While you can look at how many homes have recently sold in your area or are pending, these stats are more of a glimpse into the past than they are for the future. Instead, we’d like to share a handy list of five leading economic “indicators” you should watch.
Indicator #1: Supply of New Listings
Like many parts of the economy, the real estate market relies heavily on supply and demand.
If you’re in the market for a new home, for example, and the area you’re looking at has a low supply of housing options, this of course could lead to bidding wars that will force you to offer a higher price or have to look elsewhere.
The good news for the entire country’s real estate market right now, is that despite COVID-19 being an on-going issue, the supply of new listings is moving in the right direction!
Sure, compared to a year ago, new listings might not be what they were.
In April (2020), Redfin reported there was a staggering year-over-year decline in new listings of just over 50%. Yet, just a month later (mid-May), both Redfin and Realtor.com have shared that annual stat has already shrunk to around 30%.
As states begin to loosen their lock-down restrictions, it would make sense to see even more activity, especially since summer is the busiest season for home sales!
Indicator #2: Demand for homes
On one hand, there is an ongoing issue with inventory, but this has been a concern for years, way before COVID-19 hit the headlines. Depending on where you live, you may have personally experienced this first-hand.
The good news?
Demand is still strong, even in these “uncertain times”.
Many states are beginning to explore lighter lock-down restrictions, mortgage rates are generously low, and you’ll find a lot of agents have doubled-down on using technology to show homes and complete contracts.
All of this is helping housing demand to stay on the uptick.
Specifically, Redfin and its agents discovered the first full week of May brought with it demand that was 5.5% higher than even 2020’s pre-pandemic numbers!
Indicator #3: Time on the market
If you’ve put your plans to buy or sell on hold recently, you’re not alone.
There was a new survey done by The National Association of Realtors (NAR) that found 40% of real estate agents said clients looking to buy decided to wait a couple of months.
If you live in a major area, another survey, this time from Realtor.com, found properties for sale in the 99 largest U.S. metros have been on the market a bit longer than usual. Compared to a year ago, they have been listed 13 days longer before selling.
Whether or not a home’s price will or “should” be set at a slight discount as a result of this really goes back to the supply and demand in your area.
Overall, though, recent data for the next indicator (below) will show you shouldn’t expect any low-balling to take place.
Indicator #4: Home prices
You can often tell a lot about the current state and potential future of the real estate market in your desired area by looking at pricing trends.
Zillow.com offers a lot of useful info at a glance, and you can also search any location for more specific data.
The reality is, it’s too soon to really know what will ultimately happen to prices by the end of 2020. In general, home values tend to rise over time, but events like COVID-19 can obviously impact this.
However, the coronavirus hasn’t really put a negative dent in home prices, so far.
In fact, in March, prices had risen 4.4% on average and as of May, prices are still 1.4% higher than a year ago. The National Association of Realtors found in another survey that 72% of real estate agent’s clients had not lowered prices at all.
Also, if you’re looking to buy a home, Realtor.com has noted the continued trend of available homes shifting toward pricier options.
With homes continuing to get bigger and bigger, and inflation meaning the cost of building materials is always rising, it makes sense.
Indicator #5: Unemployment rate and jobless claims
Naturally, if people aren’t working or are concerned about job security, priorities for buying or selling a home may change.
Even if you’re still looking to apply for a mortgage, depending where unemployment rates are headed, sellers could go one of two directions:
- Some sellers might take their home off the market to avoid having to find a new home themselves.
- Other sellers might want to sell faster to have some liquid cash on hand and also not have to worry about monthly mortgage payments.
Putting It All Together
Researching the five indicators listed above will give you everything you need to start figuring out where the real estate market—including your local area—may be headed at any given time, to help you purchase your next home.
When you’re ready to take that next step, we can help you with your next home mortgage. We can help you find the right type of mortgage to match your current needs and future goals, and make the entire mortgage application and approval process an easy, stress-free experience.