Winter is traditionally real estate's slow season. Between the cold weather and the holidays, the housing market typically plunges into a hibernation of sorts, with both buyers and sellers shelving any major real estate moves until spring.
This winter's real estate market, however, is shaping up to be unlike any other before it—and, contrary to what some may have feared, is slated to be an excellent time to sell a home. In fact, Lawrence Yun, chief economist at the National Association of Realtors, predicts “it will be one of the best winter sales years ever.”
Why? Chalk it up to a perfect storm of low mortgage interest rates, sparse housing inventory, plus a pandemic that's fundamentally changed how, when, and where buyers are shopping for homes.
So if you've assumed you should put your home-selling plans on hold until spring, read on for a surprising reality check on all the reasons this winter could be a great time to put your house on the market.
While spring is typically real estate's busy season, the "silent spring" of 2020 saw the housing market grind to a near halt amid pandemic-mandated lockdowns. This, in turn, created pent-up demand to purchase property that is only now being unleashed.
“We currently see buyers sticking around in the housing market much later than we usually do this fall,” says Danielle Hale, chief economist at realtor.com®. “If that trend continues, we will see more buyers in the market this winter, too. So this winter is likely to be a good time to sell.”
"There are plenty of people in the pipeline ready to hit the market this late autumn and winter," Yun agrees.
Many real estate agents have noticed this glut of eager buyers first-hand.
“Winter is usually a slower season, but this year we're not seeing any sign of letting up,” says Matt van Winkle, a real estate broker and owner of Re/Max Northwest Realtors in Seattle. “The selling season was delayed because of COVID lockdowns and stay-at-home orders, so several months of usual busy sales periods were delayed.”
This buyer demand likely won’t wane anytime soon.
“We will see an extended purchase season in 2020 and into 2021,” says Shelby McDaniels, channel director of corporate home lending at Chase.
COVID-19 has not only created pent-up demand, but many buyers are also in the market purely because they're working/schooling from home and realizing their space is no longer big enough—particularly now that the temperature's dropping so they can't easily escape to their back patio to catch up on emails alone.
With people spending so much time in their homes, including working from home and virtual schooling, there's a great emphasis on being happy there. Thus translating into lack of space is a complaint agents hear more often now.
And if people are allowed to continue working from home rather than commuting to an office, they might also realize that they can shop for homes farther outside cities—great news for home sellers who live in more remote areas.
Although buyers are plentiful, the number of homes for sale is way lower than usual. According to The Cascade Team’s Monthly Housing Market Trends Report, in September, national housing inventory declined 39% over last year.
“Because the number of homes available is currently at a record low, even if we see some improvement, which I expect, there will still be relatively few homes for sale,” Hale says. “That will keep upward pressure on home prices and help ensure that homes continue to sell quickly."
"Inventory is low, so the overall advantage is with the seller,” agrees Yun.
Beeson, the managing broker at REMAX Northwest in Tacoma-Gig Harbor, said he has never seen so many buyers needing to write multiple offers before securing a home. “Interest rates are incredibly low. Inventory is incredibly low. And anxiety is incredibly high among buyers,” he remarked. “The buyers I have worked with this year only had a handful of homes to look at,”. “They had no time to wait and talk about it, and they had to fight other buyers if they wanted to buy them.”
It's simple supply and demand: Low supply and high demand are bound to drive up home prices, so sellers stand to make a killing.
The Northwest MLS report recapping October activity showed a 40% drop in active listings compared to the same month a year ago, an increase of 16% in pending sales (mutually accepted offers), and a year over-year (YOY) jump of nearly 30% in closed sales. The median price of single-family homes and condominiums that sold last month was $500,000, up 19% from the same period a year ago, according to the MLS summary, which encompasses 23 counties, mostly in Western and Central Washington.
We have many buyers out there looking for homes and with record low inventory, we may just have a buyer for your home.
42% of homes are receiving multiple offers, so if you're thinking of selling, now is the time!
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Mortgage interest rates are low
Although buyers will face stiff competition, it's not all bad news for them. For one, despite high home prices, record-low interest rates mean they'll save a ton of money.
Interest rates on a 30-year fixed-rate loan were 2.8% as of Oct. 22, according to Freddie Mac.
This “boosts buyer home purchasing power,” Hale says. “In fact, despite double-digit increases in home prices this year compared to last year, today's home buyers are likely actually paying slightly less on their mortgage each month, thanks to much lower mortgage rates.”
The Federal Reserve has continued to lower interest rates this year to keep the economy going during the COVID-19 crisis, says McDaniels.
“Even before the COVID-19 pandemic, economists and real estate professionals predicted mortgage interest rates would remain below 4% in 2020,” she says. “This means buyers that might have waited will consider entering the market this year.”
Although unemployment continues to rise due to COVID-19 layoffs, Hale says this could affect the real estate market, but the effects likely won’t be felt for a few months.
“A worsening unemployment rate would lead to a slowdown in the housing market and home sales, but I don’t expect that to happen immediately, more likely in the spring,” Hale says. This could create a slower start to the spring home-buying season.
Plus, if another round of stimulus money appears, this would fuel consumer spending.
“This would be a good thing for the housing market and the economy at large,” Hale says.