2021 the year that inflation reared its ugly head. Nearly everything in 2021 cost more than 2020, not just real estate. While supply-chain disruptions, labor shortages and fiscal stimulus have all been blamed for the rise in short-term inflation, another long-term force is de-globalization. As for real estate, housing bulls on Wall Street argue that this is an upturn that could last for a decade.
The housing market is on fire. In fact, it hasn't been this strong since the pre-Global Financial Crisis period. Inventory levels are at all-time lows and buyer demand is accelerating. Rising interest rates are creating buyer panic and fueling bidding wars. We have seen bidding wars on excess of 20% over ask with no financing contingencies to win bids. Buyers are not waiting for the weekend to see homes anymore, they visit on the listing date. They make sizable offers immediately in an effort to prevent a bidding war. Buyers are getting creative with their bids.
When I think of this past month 2 things jump out at me. The pace of the market and interest rates are finally on the rise. The speed at which deals are closing is at rate I have never seen. Most homes are going live to contract status within a week. This is giving agents very little time to do their due diligence to be able to check municipals. The landscape is so competitive that buyers are doing anything to win the bid; waiving inspections, paying cash, removing financing contingencies, closing late, closing early and giving shutdown offer prices hundreds over ask. The rates are climbing quicker than expected and buyers are now able to afford less. This will have a trickle-down effect on pricing, but for this month we have not felt that slow down just yet.
Will it ever get warm. For some reason this year, it feels it is taking forever to finally feel like Spring. In the housing market, what typically is the busiest buying season “spring market” started in January and is not showing signs yet of cooling off.
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