Since the COVID-19 pandemic hit the world, many of the marketplaces saw great fluctuations, but then finished 2020 with great success.
And at some point, that was expected – when everything started happening online, and people had more time to browse, many marketplaces, including the real estate ones, saw increases in visitors.
Real estate demand hits records high
Since February, the UK’s online property advertising platform Rightmove saw record visits which have been increasing in March, too. More than 9 million visitors spent a record 71 million minutes on the Rightmove website on March 3.
German ImmoScout24 saw the number of sessions increased by 7.4% to 101.4 million monthly visits compared to 2019. The Australian real estate market has seen its historic highs, too. Search volumes on realestate.com.au are now more than 50% higher than they were a year ago, according to the REA Group’s monthly Insights Housing Market Indicators Report.
The prices have been going up, too.
The same REA Group’s report shows that Australians are searching for properties with a price above $1 million more often than the low-price ones. The US Realtor.com saw home prices hit an all-time high of $370,000 in March, which is 15.6% higher than in 2020. In Austin, listing prices were up 39.8%, followed by Buffalo, N.Y. (+28.3%), and Los Angeles (+24.8%).
Some of the people wanting to buy a home in 2020 didn’t go through the process because of the coronavirus pandemic. But, 38% of people didn’t have enough saved for a down payment and 32% didn’t have a good enough credit score, showed Nerdwallet’s annual Home Buyer Report.
“Very low mortgage rates drove up demand for purchase and refinance loans, and lenders responded by tightening standards. It became more difficult to get a mortgage if you didn’t have liquidity and impressive credit, though some options remain, and still remain, available,” states the report.
These increases drove some of the companies to hire more people. Zillow plans to hire 2,000 new employees in the US, while Rightmove plans to grow its technology team by 40%.
Other companies expect record profits and plan to go public, like Sweden’s leading housing platform Hemnet Group AB, as MarketplaceDaily reported. Also, the US home swap startup Knock plans to go public, iBuyer startup Opendoor, and real estate platform Offerpad announced their going-public intentions.
Supply is much weaker than before the pandemic
Real estate market demand is on the grow, as many reports suggest, but what happens with supply?
Despite increased demand, many of the platforms see record-low new properties for sale. Realtor.com’s report showed the number of homes on the market is 51% lower than last year.
“We expect the vaccine’s rollout to alleviate some sellers’ anxieties, which could help the supply crunch. At the same time, although interest rates remain low, they’ve begun to increase, which could test buyer demand in the coming months,” said Danielle Hale, Realtor.com Chief Economist.
REA Group’s Housing Market Indicators Reports states that the biggest challenge for the market remains the low volume of stock available for sale. Spanish Fotocasa’s research showed a drop of 4% in the participation of individuals in the real estate sector, both buy and rental verticals.
The decline has occurred both among those who have searched for a house without actually finding it (from 15% in February to 13% in August) such as those who did manage to buy or rent a home (from 13% to 10%), says the report.
Redfin’s report says that at the beginning of 2020, buying and selling almost completely stopped, so they compared their 2021 data with the data both from 2020 and 2019. New listings of homes for sale were up 5% from the same period in 2020, and down 14% from the same period in 2019.
Besides that, active listings (the number of homes listed for sale at any point during the period) fell 42% from the same period in 2020 to a new all-time low. This is the largest decrease on record in Redfin’s data, which goes back through 2016.
“Sellers’ asking prices may be starting to flatten in what so far appears to follow a typical seasonal pattern. And 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,” said Redfin Chief Economist Daryl Fairweather.
The growing demand is run by the very low mortgage rates, which, on the other hand, repels sellers to list their properties on various real estate platforms.
Realtors® Seller Traffic Index remained below 50 in January 2021, which is “weak” traffic compared to the level one year ago.
A new Zillow survey showed that life and financial uncertainty are among the top reasons homeowners have not listed their home for sale during the pandemic. Zillow data finds a large majority of homeowners (70%) say they would be mostly or completely comfortable moving to a new home when there is widespread vaccine distribution.
Rightmove’s survey showed that home movers in the UK are waiting to sell their properties because there is a lack of suitable properties where they could move (33%), they are waiting until the lockdown is over (22%), and they want to know if the stamp duty holiday is going to be extended or not (24%).
Besides the stamp duty holiday, the government of the UK decided that starting in April, they will provide a guarantee to lenders who offer mortgages to people with a deposit of just 5% on homes with a value of up to £600,000 ($830,000).
The lack of supply could drive business changes
Since 63% of Opendoor sellers are also looking to buy another home, Opendoor decided to adjust its business model and encourage sellers to sell. The company has increased price ceilings across the country, planned to buy homes in age-restricted neighborhoods in six of their markets, and they’re buying older homes from the 1930s to 1950s, and repair them themselves, as they announced in the company’s blog.
Today, we are making it possible for even more 🏠 sellers to move with ease. We are expanding our buying capabilities across the U.S. to purchase a wider range of homes.https://t.co/o2CLKyEPw6
— Opendoor (@Opendoor) April 13, 2021
Realtor.com® added Knock’s Home Swap™ to its seller’s marketplace, so they can offer those homeowners who need to sell their old houses in order to buy new ones a new option – buy first, sell later.
“There are a lot of options available for selling a home, and by adding information about Knock’s Home Swap to Seller’s Marketplace, consumers can explore more selling options that can help streamline the process of moving to a new home,” said Rachel Morley, realtor.com® Chief Product Officer.
Offerpad launched an Extended Stay service which allows sellers to stay in their sold homes up to 60 days after closing escrow.
“Customers come to Offerpad because they don’t want the typical home buying and selling experience. They want certainty, control, and freedom and that’s exactly what we’re delivering with our new 60-Day Extended Stay service. It’s the right solution at the right time, enabling our customers to sell quickly and move freely without the fear and stress of having to find a new home at the same time during today’s highly competitive market conditions,” said Brian Bair, Offerpad founder and CEO.
Housing market predictions for 2021 and 2022
Redfin predicts ways the housing market will change after the pandemic. Higher mortgage rates will slow down the now skyrocketing demand. Home values will still grow, but at a slower pace than now – about 5% per year. Another prediction is that more people will list their homes for sale, but that percentage will still remain below the pre-pandemic levels.
“More homeowners will decide to list in order to cash in on high home prices. And a small portion of those who were reluctant to sell during the pandemic because of fear of exposure to the coronavirus will be ready to list once vaccinated. Some homeowners who have been in forbearance will want to sell once forbearance ends to pay off their missed mortgage payments. But many new homeowners who locked in a mortgage rate below 3% during the pandemic won’t want to sell and give up their low monthly mortgage payments,” says the report.
Norada’s housing market predictions for 2021 and 2022 say that with the continued supply-demand imbalance, the upward pull on prices is expected to remain consistent in 2021. Still, that imbalance is softening as more inventory is expected to become available later this spring.
“The results of more listings in spring-summer buying season and higher mortgage rates are that both could slow down the pace of home price appreciation. If homes would sit on the market longer, markets will then accumulate more active listings,” says the report.
But properties don’t stay on the market for long. Homes in the US are sold in 54 days on average, which is 6 days less than a year before.
What does that mean for the real estate market?
Even though there was a lot of turbulence in the real estate market, it is far from crashing in 2021 or 2022, predicts Norada.
On the contrary, the US housing market continues to play an important supportive role in the country’s economic recovery.
“Housing activity is expected to remain strong in 2021, but the growth will likely decelerate from the torrid pace set in the second half of 2020. While the ESR Group expects home sales to rise 3.8 percent in 2021, the monthly pace is likely to slow through much of the year,” concludes Norada’s report.