This is most certainly a seller’s market! It has been caused by several things coming together at the same time. First, COVID stay-at-home orders initially caused many sellers to remove their homes from the market. That shrunk supply. As the pandemic raged on, interest rates stayed low and caused many buyers who had been on the sidelines to decide it was a great time to buy. That increased demand.
Next, low rates of return in investment markets and investors concerned with the stock market caused many institutional investors to turn to real estate as a haven for safety and return. This means retirement funds and large investors began to compete in the market to purchase what supply of real estate was available. This again increased demand and they are cash buyers.
Remote work changes the game
Throughout these changes, remote work became a more acceptable alternative and many buyers began searching for homes in markets removed from the location they worked in. Many of those areas already had such high prices that many of these buyers were renters looking to buy but with nothing to sell. As mentioned in this CNBC article, work from home is here to stay. More demand with no more supply.
An increase in costs – everywhere
As purchasing got tougher, many opted to look for new homes being built. With the onset of COVID, many builders initially had to scale back. When they were able to ramp back up, prices of materials had dramatically increased and supply was limited. In many instances, available land, as well as labor, shot up. With the local government working from home, the typical process of getting additional subdivisions approved was slowed as well. There can’t be a significant increase in supply until this is resolved.
Now the dynamics have changed
Sellers see that they can get above the asking price for their homes and that makes it more attractive to sell! But wait, when they sell, where will they go? With a lack of supply in the market, securing a new home is significantly more difficult as well causing many would-be sellers to simply decide to wait. No additional inventory!
Thus, a seller’s market. Many wanting to buy with a limited supply available. Prices are skyrocketing and those with no cash are getting squeezed out. There is nothing in this market that is “normal.”
Exercise care and get professional help before jumping into this market!