In the last two years, the real estate market has been on a wild ride. Agents have completed some historical deals and buyers have found incredible rates from mortgage lenders. Like 2020, this past year showed a lot of the same trends in the industry. But will these trends continue into the coming year? Below are some of the craziest things seen in the market and what buyers and sellers can expect in the coming year.
Buyers Need to Be Creative with Offers
With such limited real estate inventory across the country, it’s no wonder that buyers have had to get creative with their offers. Some interesting offers include waiving home inspections altogether, ignoring any repairs that need to be made to the home and offering cash on top of the offer. In some deals, buyers have offered as much as $100,000 over the asking price just to secure their offer with the seller. While this is very lucrative to sellers, it makes the buying process very competitive. As long as limited inventory remains a trend, we’ll likely continue to see buyers come up with creative offers.
Inventory Is Very Limited
From Texas to Tennessee, California to Colorado and everywhere in between, as soon as a home is on the market, it’s under contract. This has made the market “hot” for sellers and is what drives bidding wars among buyers. Most major cities and even rural areas have experienced this trend despite new homes being built all of the time. Almost anywhere you go you will find new communities and subdivisions being built to support all of the new homebuyers. It’s amazing to see how quickly the market grew and as long as people keep moving, we’ll continue to see a limited inventory.
Interest Rates at Historic Lows
This is definitely a trend we will not continue to see. The federal reserve lowered interest rates at the onset of the pandemic in 2020 to help those who were refinancing or buying a home for the first time. While the intention was to help, many real estate investors and homebuyers took advantage of the low rates to secure more and more property. It’s smart, but it’s not something the federal reserve will likely continue in the coming year. Even with outstanding credit, you should expect home loan interest rates to rise during the first half of the new year. If you’re in the market for a home or a refinance, now is the time to secure a historically low-interest rate.
Home Insurance Policies Have Changed Too
With so many homes being purchased without inspections, it means insurance policies have to cover more. Numerous cases have shown roofing inspections waived only to have to replace the roof of the home a few months later. Insurance companies were not happy about this and thus have structured policies that pass a more expensive premium to the homeowner. One insurance broker in Bend, Oregon noticed a 33% change in homeowners policies just in the last year. We’ll likely continue to see this trend happen in the coming year as insurance carriers try to recoup business.
Most analysts believe we are at the height of the current real estate boom, but they don’t predict major changes happening until at least 2023. If you are in the market for a new home, be creative with your offer, jump on a home as soon as it is on the market, secure a great interest rate and plan for the insurance policy you will need.