There’s no doubt about it. Home prices are soaring right now. Record low inventory of homes and strong buyer demand have led to a rise in bidding wars and multiple offers. Therefore, homes today often sell for more than the list price. In some cases, they sell for a lot more. In February 2021, on average, homes in Long Beach sold for 101.6% of the list price. Nationally, 45% of home buyers are paying full price or more. Clearly, this is a real estate market unlike any we’ve ever seen. So here’s what these 2021 home prices mean for you as a buyer.
Forget What You Heard
For generations, the homebuying process never really changed. Sellers would try to estimate the market value of their home, then tack on a little extra to give themselves some negotiating room. That number would then become the listing price. Buyers would then try to determine how much less than the full price they could offer and still get the home. Generally, the asking price was the ceiling of the negotiation and the actual price would always be somewhat lower than the asking price. It was almost unheard of to pay more than the listing price.
Then 2020 rolled around. Fear of selling during COVID meant many would-be sellers put their selling plans on hold. At the same time, mortgage rates dropped to record lows. This created what can only be described as a homebuying frenzy. The pandemic has started to get better as the vaccines roll out. However, inventory still hasn’t been able to catch up with the homebuying demand. Even now, in March 2021, homes are continuing to sell at record speeds and prices. Even new construction can’t keep up. Jeffrey Mezger, CEO of KB Homes recently put it bluntly: “It’s crazy. There is no inventory.”
That’s what agents and buyers across the country are experiencing, and here in Long Beach CA and surrounding Orange County and Los Angeles communities, the inventory is far below what’s needed to meet the current demand.
2021 Home Prices Require a New Perspective
In this market, you likely can’t shop for a home with the old-school mentality of refusing to pay full price or more for a house. 2021 home prices require more strategy and a whole new mindset.
The shortage of homes for sale means many homes are actually being offered in an auction-like atmosphere in which the highest bidder wins the home. In an actual auction, the seller of an item agrees to take the highest bid, and many sellers set a reserve price on the item they’re selling. A reserve price is the minimum amount a seller will accept as the winning bid.
When navigating a competitive housing market, think of the list price of the house as the reserve price at an auction. It’s the minimum the seller will accept in many cases. Today, the asking price is often becoming the floor of the negotiation rather than the ceiling. Therefore, if you really love a home, know that it may ultimately sell for more than the sellers are asking. So, as you’re navigating the homebuying process, make sure you know your budget, know what you can afford, and work with a trusted advisor who can help you make all the right moves as you buy a home.
In the video below Shalyse discusses figuring out how much to offer on a home.
Learn more about how to get your offer accepted in a seller’s market!
When You’re Ready to Enter the Market
Here at The Shannon Jones Team, we know that this is a tough market for buyers. However, we have successfully helped a number of buyers navigate home prices in 2021 and this new real estate market. If you’re still looking for the right real estate expert on your side, we’d love to help you. Simply fill out the form below or give us a call at 562.896.2456. We look forward to serving you!
Here are some more home buying resources:
- What You Need To Know About Buying A Home During A Pandemic
- Home Buying Myths Holding Back Buyers
- Mortgage 101: What You Need To Know About Financing
- Buying A Home Can Significantly Increase Future Wealth
- 5 Ways To Reduce Home Buying Stress