2020 Market Snapshot: Past Indicators Predictive of Future Trends?
By Renee Cohen
We’re now in the final month of 2020 and what a year it’s been. The COVID-19 pandemic pervasively upended so much in our lives this year and the real estate market was not insulated from that fallout. The COVID-19 impact to the real estate market is clearly evident when comparing year-over-year statistics from 2019 to 2020, and it will be interesting to watch how the market responds and trends unfold in 2021.
Looking at a few key statistics year-over-year from November 2019 to November 2020, the numbers are very telling. Active inventory is down almost 50%, average sale prices are up 14%, properties are going under contract 33% faster, and there is approximately one month’s worth of inventory across the metro area. All of these metrics indicate the current market strongly favors sellers, and any frustrated buyer actively looking can certainly attest to the crazy and somewhat exhausting market in which they’re competing. These statistics directly resulted from basic supply and demand; there were more buyers in the market than there were properties available to buy, and the low supply/high demand caused prices to go up, properties to sell quickly, and inventory to shrink just as rapidly.
-Nov 2020 – 5256
-Nov 2019 – 10,486
Supply of Inventory
-Nov 2020 – 1.25
-Nov 2019 – 2
However, the supply and demand principle in play in the market was exponentially aggravated by COVID-19. Because of the shut-down in March and April, our spring season was delayed by a few months and we skipped the typical summer slow-down altogether. Furthermore, and this is the more emphatic factor, the buyer pool expanded to include a segment of buyers who never planned to be buyers in the first place; through the course of the Pandemic, many people realized that their homes no longer accommodated everyone working from home and learning remotely. Additionally, because people were no longer commuting to their offices, they realized they do not need to live so close to their offices, and many decided they wanted to move further away to less dense areas where they could afford more space, both in and outside of their homes. It’s this segment of the buyer pool – those who never planned to move – that dramatically increased the market demand, thereby impacting supply and pressuring prices up.
What are the immediate implications for buyers and sellers as we look to the start of the new year? If you are planning to sell in the near future, don’t wait until spring to list your home; while inventory is not expected to spike dramatically nor all at once, it will increase and you’ll want to beat your competition to the market if you can. Furthermore, when you list, make sure to be realistic in your pricing strategy. Even though inventory is tight, buyers are initially passing on homes that are clearly overpriced and waiting for them to take price reductions before offering on them.
Average Sale Price
-Nov 2020 – $543,772
-Nov 2019 – $474,673
-Nov 2020 – 100%
-Nov 2019 – 98%
If you’re a buyer entering the market at the beginning of the year, the best things you can do are plan to be patient, expect to compete with other buyers out there, and know your limits for how far you are willing to compete. It may take a while to find the right home and you may have to lose out on one or two, or several, before you find The One, and that’s just how things are working in this market.
Days In MLS
-Nov 2020 – 24
-Nov 2019 – 37
Will this skewed supply and demand, and astronomical appreciation continue into 2021? Will 2020 be an anomaly while we watch the return of historically typical trends or will 2020 be the start of new trends entirely? Much of that rests on current unknowns including the trajectory of COVID-19 cases over the next several weeks, the approval and implementation of the vaccine, the state of the economy, and the stability of interest rates over the next few months. These factors all play into both the confidence level of buyers and sellers and how the real estate market will perform, and it will certainly be interesting to watch how the trends unfold.