The latest housing market forecast is in, and things are finally looking up for potential property buyers as home prices show early signs of flattening off. A return to normality still seems a long way off, but the latest market figures suggest that the record-breaking home price growth that has accompanied the pandemic may finally be coming to an end.
The most significant change as of the first week of April 2021 is the flattening off of home values. While they're still enormously high – 16 percent higher year-on-year – they also haven't increased since late March. By comparison, during the same period in 2019, asking prices rose 0.8 percent.
According to Redfin Chief Economist Daryl Fairweather, 'The housing market is more competitive than we’ve ever seen it, but a couple indicators are causing us to ask whether we’re nearing a peak in terms of how fast demand and prices can grow.' Buyers may be reassured by Fairweather's view that home sales are finally entering 'a typical seasonal pattern' – something that just did not apply to anything that has happened to the housing market in the past year.
The housing market is also beginning to feel the strain of unaffordability, which is bad news in the short term, but will prevent unsustainable home price growth going forward: 'the drop in mortgage purchase applications tells me that some buyers are dropping out due to the lack of affordable homes for sale. If these trends continue we can feel more assured that we are not in the midst of runaway home price speculation or a housing bubble.'
In fact, fewer buyers and more sellers is exactly what the housing market needs right now. There's still an enormous demand for too few homes, with homes currently staying on the market for a median of 25 days, the lowest time on market on record since 2012. Given this competitive environment, many buyers are still prepared to pay more than the already inflated home prices, with 42 percent of homes selling for more than their list price during the period leading up to April 4, an all-time high.
This may be about to change, however. As more sellers enter the market, the fierce competition over homes will subside, creating more hospitable conditions for buyers. According to Zillow, seller confidence is retuning, with almost two-thirds (61%) of respondents saying they believe it’s a good time to sell a home, more than any time since February 2020. Greater seller confidence should eventually translate into more homes listed for sale, keeping home prices in check.
While it is difficult to make a decision about whether to hold off looking for a house based on prediction and sentiment rather than hard figures, buyers who have the time to wait should do so – or use their flexibility as an advantage when negotiating with sellers who have put their homes up for sale. Daryl Fairweather concludes: 'Sellers who are concerned about finding their next home are asking buyers for a rent-back agreement, which allows the seller to stay in the home until they can move into their next one. Offering a rent-back agreement can also be a winning strategy for buyers with flexible timelines.'