Many Americans are wondering if they should hop on to what could very well be the tail end of the home selling trend before the year is out. So, in essence, 2021 has proven to be an excellent year for both homebuyers to take advantage of meager mortgage rates and for home-sellers, who have been capitalizing on ever-rising housing prices and increased demand.
Predictions indicate that these trends will not remain at the current levels, and we will begin to see these mortgage rates rising by as early as the end of the year. If you are on the fence about whether you should put your own home on the market, please read on to learn about the five reasons you should sell your home now. In addition, we will answer why you should not wait until rates start to rise and demand begins to fall, making your home more challenging to sell.
1. We Are in a Seller's Market
Over the past year, CNBC.com reports that "mortgage prices have been going up an average of 13.2% increase from May 2020. And according to a new report from Zillow, House buyers can expect prices to keep climbing in the year to come: Zillow economists are forecasting increases of 14.9% by May 2022", due to housing inventory falling about 33%. So we find ourselves in a time where the seller is currently king/queen.
Fortunately, the COVID-19 pandemic has not done much to slow the buying demand for homes in the U.S., which has made it the perfect time for you to sell your home. Between now and next year, predictions and indicators all point to a continued rise in the selling prices of homes. With this prediction in mind, now is the time to get your home on the market. While selling prices and demand are high, you should leverage this boom in the housing market.
Be aware that demand could always fall between now and next year if mortgage rates go up, making homebuying more out of reach for many Americans. This change would drive not only demand down, but you may find yourself in a position where you have to lower your selling price to stay competitive. Reports also show that Colorado closings were down in June and could continue to taper off.
This year people found fighting over listings almost as soon as they went on the market. The added incentive to save money over an extended period of time with the meager mortgage rates has driven this demand pattern. However, we all know that this pattern will not hold forever, and by looking at the economic trends and the housing market reports and predictions, the experts sense a change is coming.
2. U.S. Economy is Growing
According to the Bureau of Economic Analysis reports, our economy has shown growth in our GDP and GDI. Thus, even if personal savings and disposable income have gone down in the last quarter, it is an encouraging sign. Moreover, due to the COVID19 stimulus payments, businesses are opening back up and being incredibly nimble with their COVID19 responses, and learning to be adaptable in this constantly evolving social and economic time.
Meeting the market demands during the pandemic has prioritized mortgage lenders to provide homebuyers with lower mortgage rates and even salary-based mortgage loans. We had seen the economy begin a slow turnaround during the past year when our government responded to the pandemic with stimulus payments, the Paycheck Protection Program, loans, and grants to businesses. As a result, the market is thankfully improving, which is a far cry from the sizeable dip from Quarter 4 of 2020 when the market and economy were running scared. To make homebuying feasible for people suffering under the burden of a global pandemic, mortgage rates that were close to 5% in 2018 have dipped as low as 2%.
3. Mortgage Rates Are Low (But not for Much Longer)
Mortgage rates are likely to rise by the latter part of 2021, and we are seeing this shift starting to happen this August. The good news is that rates are currently at a record low and can be as low as 2%. Tim Lucas of The Mortgage Reports predicts that "With mortgage rate trends moving back upward, we may see a return to 3% territory sooner rather than later," with the likelihood of this taking place as early as August of this year, which is proving to be true. While 3% is still historically low, the upward tick of rates during a pandemic will make many first-time homebuyers less likely to purchase.
The pandemic has caused a lot of uncertainty and upheaval in the national and global economies. Due to this period of instability, a global pandemic drove mortgage rates down to make homebuying more appealing to the masses. The opportunity to get a low mortgage rate ensured Americans they can purchase a home and pay less over the lifetime of that loan than in past years. With rental prices also rising, the low mortgage rates are a boon and an added incentive to buy instead of rent.
4. Millennials Are Reaching Home Buying Age
There are more and more Millennials reaching the homebuying age. The average median age of first-time homebuyers in the United States is 33 years old. A generation that has seen two recessions in their lifetime is already less likely to marry, more hesitant to have children, and are more focused on career and financial freedom. As a result, we see Millennials buying homes and property, driving up demand for listings when supply is already low.
The low mortgage rates have also been a driving factor in turning Millennials from renters into buyers. The idea that homeownership is within their grasp as cost-effectively as renting has sent Millennials searching for homes in the suburbs and away from traditional rental situations. The Mortgage Reports also predict that "the U.S. economy is still on a steady path to recovery, at least for the time being. And that means rates should tick higher if the current growth rate continues". In addition, Millennials are snatching up single-family homes faster in Colorado than condos or townhomes, so this trend is also proving to be true for the Colorado market, with the Metro area holding onto the status as a seller's market.
5. Increased Demand Has Created a Selling Shortage
Diana Olick for CNBC reports that "The inventory of homes for sale was down 43.1% year over year at the end of May, representing 415,000 fewer homes for sale on a typical day in June" even though "new listings, again, were higher, but still well below the pre-pandemic average for June." These inventory levels mean that now is the best time to take advantage of this shortage to leverage selling your own home at the maximum selling price with the current trend.
It would be best if you did not wait for interest rates to start rising again, driving demand down and forcing you to offer your house at a more competitive price. Getting your house on the market before the end of the year will ensure that you may not only be able to demand top dollar for your home, but you could even see a bidding war erupt, which will also drive up the selling price. In addition, new home construction and sales are on the rise, which could make it slightly more challenging to compete to sell your home. Finally, we have seen the inventory levels in Colorado rise in July while closing rates went down a bit. This period of high demand is the moment you should sell if you are uncertain about the market's future and direction.
The increased demand we currently see indicates this as the prime time to put your home on the market, but in no way means that you will not maximize your profits if you don't sell now. The market trends and indicators mentioned are just predictors that could shift over the remainder of this year. Keeping the five reasons we just went through in mind, doing your research, and consulting with a real estate broker will help you make the right decision.
The fact does remain that increased demand and all-time low mortgage rates make this prime time to sell your home, so if you are interested in learning more about the home-selling process, check out our 7 Tips for a Quick Home Sale, as well as our guide to what homebuyers are looking for in 2021. Also, feel free to reach out to an American Home Agent at (303) 695-5900 to learn more and get all of your burning questions answered.