Sunil Modi had already spoken to a realtor about listing his home in Chicago last March when the rise of the COVID-19 virus put a halt to his plans. “I didn’t think of selling at the time assuming the buyers would most likely decrease given the environment,” he says. “The other factor was also the difficulty in managing showings with the COVID restrictions.”
This year, Modi plans to finally go for it, taking advantage of Chicago’s prime May to June home buying season. “The main factor that has changed for me is the rising prices of houses,” he says.
In a housing market that is seeing record low inventory as well as record-high home prices, buyers are hoping more homeowners will join Modi in listing this spring.
Where are all the homes?
At this time last year, the U.S. was feeling the initial effects of the COVID-19 pandemic. Lockdowns were the norm and the real estate market saw a dramatic decrease in activity as no one really knew what to expect. However, the drop in mortgage rates led to a surge in home buying that has lasted well into this year.
As rates kept dropping to new record lows throughout 2020, homes started flying off the market. Demand was so high that bidding wars became the norm, homes sold up to two weeks faster than the year before, and home prices soared. With fewer homeowners listing than usual, all of this led to a record low supply of 1 million housing units at the start of 2021.
To put things in perspective, Danielle Hale, chief economist for listing site Realtor.com, notes that there were about 117,000 fewer new listings in March than during the same months from 2017 to 2019. That is in addition to the 200,000 fewer listings on the market between January and February.
“In many areas of the country, there are half as many available homes for sale than a year ago — and in some markets that number increases to less than one third,” says Hale. “For a buyer, that means if they had 10 homes in their price range to choose from last year, they have less than five, perhaps as few as three, available to them today.”
Luckily, heading into the spring buying season, there are some tentative signs that sellers are returning to the market.
According to Realtor.com, there were 36% more listings during the week ending April 10 compared to the same week last year, when very few listings were coming onto the market thanks to the effects of the COVID-19 virus. It’s the only second time this year there has been a year-over-year increase in new listings. Fannie Mae’s Home Purchase Sentiment Index also saw an increase in the number of people who say it’s a good time to sell, increasing to 61% in March from 55% in February.
The issue, says Hale, is that even as more new listings come on the market, demand is so high that they are being snapped up very quickly. New homes won’t stay active on the market for very long, so buyers will need to act quickly.
Higher home prices are drawing some sellers back
“When you hear your neighbor just sold their house for $650,000 and had a bidding war for it, it makes you want to sell your house too,” says Mindy Jensen, community manager at BiggerPockets, a site for real estate investing advice.
The last week in March, the median home listing price reached an all-time high of $370,000, 15.6% higher than a year earlier and the 31st consecutive week of double-digit gains, according to Realtor.com.
In February, the median final sale price was $313,000 for existing-homes, according to the National Association of Realtors, up 15.8% from February 2020. In a sign of just how competitive the market has been, about 1 in 4 homes on the market sold above the listing price, according to data from Zillow. The hope is that higher prices will lure more sellers to join the market over the coming months.
Jade Shenker, who owns a single-family rental property in Miami and originally planned to sell last February, was drawn back to the market by higher home prices, recently deciding to sell because of the home’s huge appreciation in value.
“We’ve been able to increase [the] asking price by almost 40% because of how many people are interested in buying houses,” says Shenker.
The vaccine rollout could allay some seller fears
Hale believes another reason more sellers will come to the market this spring is the increasing distribution of the COVID-19 vaccines.
“As the vaccine rolls out, the idea that health concerns are possibly keeping some sellers out of the market will be less of a hold-back factor,” she says. “I expect we’ll see more sellers just from that.”
Nicole Canion-Caballero, CEO of Pathways International, part of brokerage eXp, has seen a bit of an increase in the number of homes up for sale in the San Francisco Bay area during February and March, when the spring buying season typically begins there.
Despite the uptick in listings, Canion-Caballero says home buyers still outnumber home sellers and that some sellers are still wary about showing their homes to too many people because of concerns over the virus. Instead, they are opting for off-market listings that are only advertised to other agents. These listings won’t show up on an MLS until they have been optioned or are already under contract.
When is the best time to list a home?
While the lure of higher home prices and the security of vaccinations has brought more buyers into the market, some are still waiting for even better returns. Andrea Geller, a broker with Berkshire Hathaway HomeServices in Chicago, has spoken to clients who are considering selling this year but are waiting to see what neighbors get for their listed homes.
That tactic may not guarantee the best price. “By the time their neighbors close, which is typically 45 to 60 days, this crazy, crazy market could not be as crazy to where there’s not an opportunity to get those over asking prices and top dollar,” says Geller.
Even in a market as hot as today’s, listing your home at the right time could lead to better results.
Realtor.com’s 2021 Best Time to List report compared a number of factors, including competition from other sellers, time to sell, median list price and buyer interest for the years between 2018 and 2020. According to the study, the best time to list is around the third week in April, when there is typically less competition, higher prices and faster sales compared to the other weeks in the year.
“For most sellers listing sooner rather than later could really pay off with less competition from other sellers and potentially a higher sales price,” said Hale in the study. “They’ll also avoid some big unknowns lurking later in the year, namely another possible surge in COVID cases, rising interest rates and the potential for more sellers to enter the market.”
Whether significantly more sellers decide to join the housing market this spring or not, Hale thinks “it’s going to be an interesting season.”