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The Real Reasons Why the Housing Market is So Competitive
Here are the 3 reasons that have made real estate more competitive than ever in 2021.
If you are in the market to buy or sell your next home, you may be in for a wild ride. There is currently a massive shortage of homes on the market, which has caused home prices to spike by almost 20% over the past year. This is leading to frequent multi-offer situations and bidding wars for houses that are on the market, with some houses even selling before the “For Sale” sign is even placed in the front yard. If you’re planning to sell your house soon, there is a good chance you’ll end up receiving offers quickly after placing your home on the market. But if you’re looking to buy a new home in the near future, you may find it’s more of a challenge than normal. By understanding why real estate has become so competitive, you will have an edge up when you are ready to make an offer.
Millennials are entering the housing market.
Millennials have begun entering the housing market, which means more people are looking to buy homes when there is a shortage of homes available. Millennials have advanced in their careers enough to afford to buy a house, and are eager to have a home to enjoy their married life or start families. According to Apartment List’s Annual Homeownership Report, Millennials led all generations in home buying in the last year and Millennial homeownership rates are rising faster than any other age group.
While it’s nice to see younger generations be successful, Millennials’ arrival in the real estate world have accentuated the housing shortage that has plagued America since the Great Recession. According to Business Insider, the U.S. has been 6.5 million homes short since the early 2000s, and we are still underbuilding. This problem was then worsened during the Coronavirus Pandemic due to building being delayed by shortages in lumber and quarantine restrictions.
Working from home changed the game.
Thanks to the COVID-19 pandemic, companies learned that their employees could successfully work from home and they could save money on overhead costs by not having a physical office space. Even with the pandemic ending, remote work is likely here to stay. In fact, many companies are allowing their employees to work remotely permanently, or are implementing hybrid schedules where employees only come into the office once in a while.
When employees don’t need to commute to the office daily, they can comfortably move farther away from expensive work centers and employment hubs, such as San Francisco, Los Angeles and New York. There is less concern surrounding a longer commute for employees on a hybrid schedule because they can save money and don’t have to go into the office daily. For employees who have transitioned to working from home full-time, they can work from anywhere within the United States. They have the freedom to move to any state or city their hearts desire, which can increase competition in housing markets all over the country.
Interest rates are lower than ever.
Interest rates are lower than ever and home buyers are eager to take advantage of these incredible rates while they last. By the end of 2020, mortgage interest rates had broken records for the lowest rates ever recorded in history multiple times, and have continued to stay low in 2021. There is a pervasive fear of missing out because of these rates that has led consumers to essentially panic buy homes, and has contributed to many of the multi-offer situations and bidding wars when decent houses come on the market.
Whether you are buying or selling your home, remember to stay calm and be patient. The current conditions in the real estate market are unprecedented, so your best defense is to arm yourself with knowledge and a good attitude. Have faith that you will find the perfect home, and everything will work out that way it’s meant to be.