Pandemic Housing Boom – Low-Interest Rates Drive Home Sales to Record Levels creating Win-Win for both Buyers and Sellers
The Silver lining of the Covid-19 pandemic may be the housing market rebound in 2020, creating a win-win market for both Buyers and Sellers in 2021. The housing market is poised for another strong year. With lower interest rates and the large millennial generation entering their prime homebuying years, home sales dramatically dipped in the spring of 2020 (due to widespread shelter-in-place restrictions) only to quickly rebound in the summer and into the fall and winter months.
U.S. sales of pre-owned homes continue to rise to the highest level since 2006, as historically low-interest rates and remote (stay-at-home) work during the pandemic increased homebuying demand. Nationally, contract signings rose 21.4% over December of 2019. According to the National Association of Realtors, December 2020 sales marked a 22% increase from a year prior. The pending home sale index hit 125.5 – an all-time high for December. With existing-home sales totaling 5.64 million in 2020 – up 5.6% from 2019 – home sales reached the highest level in over 14 years!
The record low level of mortgage rates has greatly enhanced affordability for home buyers
Mortgage rates have remained near their all-time lows of 2.73% for 30-year fixed-rate mortgages and 2.21% for a 15-year fixed rate. Mortgage lending standards have tightened somewhat for buyers – however, many homeowners (facing financial difficulties and looking to sell) can take advantage of current policies allowing them to skip monthly payments and make them up when they close escrow. Also, the new VA (Veteran Administration) loans are offered with virtually “no money down”! This creates a win-win market for both Buyers and Sellers, as the Seller is now more motivated to cash in at an opportune time.
The widespread shortage of homes for sale has prompted competition among buyers and pushed prices higher. In some cases creating multiple offer situations in which Sellers can close quickly at a strong fair market value. Combine this with Buyers being able to take advantage of attractive, unprecedented lending options and we have the perfect win-win scenario for both parties.
Strong demand is forecasted to forge ahead into spring and summer 2021
The recent lack of inventory temporarily curbs even greater home sales. With the supply of homes lower relative to demand, active listings fell 35% from January 2020. Overall, new-home sales have also continued to climb – an encouraging sign for the U.S. economy – spurring home construction and sales of home goods and furnishings.
This strong demand is expected to continue as Covid restrictions loosen and homeowners adjust to new lifestyle needs following a year of relative hibernation. Housing starts, a measure of U.S. home-building, rose 5.8% in December from November to the highest seasonally adjusted annual rate since 2006, the Commerce Department reported last week.
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Thank you for reading my blog. If you are interested in taking a tour of properties in and around Laguna Beach or our surrounding coastal communities, feel free to call me, Cynthia Ayers, at #949-494-0490. I look forward to helping you find your perfect dream home along South Orange county’s sunny shores!