It is that time of year again when I pull out my crystal ball and make predictions of the coming year as it relates to real estate. Although I wasn't able to predict the pandemic last year, I was still spot-on with the flow of the real estate market. We did experience a great strong market which is continuing right now. I believe that people will look back at this winter and see that this has and will be one of the strongest Winters in the past 15+ years. That being said, I believe it doesn't matter if you are thinking about buying or selling, you should take advantage of the market this first quarter. Let's dig a little deeper into this reasoning. For a buyer, right now inventory is very slim pickings. If you find a home, you might be competing with other buyers which drive the price up a bit, however, interest rates are down near 2%! Let's take an example of a mortgage at $400,000, your P&I payment would be $1478. (not including taxes and insurance) I believe like most normal years, this year will have rising interest rates in the spring. If the rates go back pre-covid rates, we could be looking at 4.5% which results in a P&I payment of $2027 at $400,000.00. What that means, is if you qualify for a loan at $400,000 now, when rates rise, you will only qualify for a loan of $292,000!!! That is a difference between purchasing a single family home, to now affording only a townhouse in the same area. This is a drastic difference that shouldn't be overlooked!
Now let's look at the same scenario for a seller. Right now the market is still hot. It is a seller's market. Selling now will yield the best possible price! If you price your home correctly and have us market it correctly, you will have competing offers and get your best possible deal for your house. What if you decide to wait until Spring? Well, that is what most sellers do. They wait until spring because that is the "best time to sell" Well, I don't believe that is the case in 2021. As any other typical year, more and more homes will come on the market in the spring. Inventory will be up. We have already discussed the buyer situation, so now less buyers can afford your home. These buyers will be upset that they cannot afford their dream home that they could afford mere months ago, and they will decide to rent for another year or so to "save" more money. The market will stall in spring. It's entirely plausible 2021 will be known as the worst spring market in decades.
Okay, so what about the rest of the year? Well it isn't all doom and gloom, especially for investors! Come summer, the US should have a majority of the people vacinated against COVID-19, (or at least those who want to be) Once COVID begins to diminsh from the threat it absolutely is today, hopefully things will start to approach something akin to "normal". All the banks/mortgage companies will eventually start the foreclosure proceedings again. Now remember, they have been unable to do anything for a year. Many individuals haven't been paying on their mortgages and may be able to add the 2020 deficiency to the end of their loan payoff extending by one year, but others won't be so lucky. Foreclosures will become another part of our marketplace again. Of course, that will drag down the prices again, so sellers will have to sell for less, but the buyers that were unhappy in the spring market, might be able to recoup a bit in fall/winter.
To summarize, buy or sell in the first three months, or Investors get ready in the fall!
Cheers & Happy 2021!
