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Where does the real estate market go from here?


2020 has upended virtually every facet of society — from the way we work to how we spend our time, anchoring our daily lives even more firmly around the home.


So, with our houses occupying a more important role in our lives than ever, where does the real estate market go following the pandemic?


This, my friends, is the question of the day for sure. After a short dip during the stay-at-home order, the market seems to have recovered very quickly.


But why?


Most likely the supernova market that we have experienced after the stay-at-home order was lifted was likely caused by the same factors that caused the market to be hot in the first place:

  • low housing inventory

  • historically low interest rates

  • a huge Millennial buyer pool.

That’s right: In 2019, 38% percent of home buyers in the U.S. were Millennials. Not only are these buyers eager to find a home and purchase it with mortgage rates as low as 3% on a 30-year loan, but they also appear not to be afraid to get out and participate in the housing market during a pandemic.


COVID-19 has not stopped them from chasing the right home for them — even with such low inventory.


CAN HOT SELLER’S MARKET ENDURE?


But can we really stay in a hot seller’s market during both a pandemic and a recession?


Most likely this supernova market that we are experiencing will be short-lived. We are still facing an unpredictable pandemic while headed into cold and flu season. On top of that, national unemployment is still more than 10%.


It appears that we have borrowed from the spring market and the fourth quarter market to create a robust third quarter market. Therefore, it is quite possible that the real estate market will soften again going in to the fourth quarter and depending upon what happens with COVID-19 this winter, it may stay down for a bit. Some are calling it a “W” recovery where the market drops during the initial outbreak, quickly recovered post-stay-at-home orders, and then drops off again in the fourth quarter to recover at some point in the future — thus following the shape of a “W”.


So the message for potential home sellers is pretty clear: “Sell now!”


Values have jumped in most areas due to low housing inventory. We have even seen a valuation increases in areas where prices had stabilized or even dropped a bit pre-COVID-19 — they have now jumped up again.


But there’s a good deal of uncertainty on the horizon, and those value increases may not be around for long.


‘CRAZY LOW INTEREST RATES’ OFFER SILVER LINING TO BUYERS


Is it only a good market for sellers? What about buyers? The gift of this market for potential home buyers is one thing and one thing only: crazy low interest rates.


A potential home buyer’s buying power (affordability) right now is ridiculously high because the cost of borrowing money is so inconsequential. Interest rates are so low now that they are causing renters to break their leases because in many cases a mortgage is the same or less than their rent.


Yes, inventory is low. But with borrowing rates where they are, purchasing power is remarkably high.


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