The demand for homes this year is extraordinary as record-breaking numbers of hopeful buyers continue to shop for homes. In a normal year, the peak homebuying season comes to a close by early fall. However, 2020 is anything but a normal year, and the housing market is no exception. Lawrence Yun, Chief Economist for the National Association of Realtors (NAR), explains:
“Home sales traditionally taper off toward the end of the year, but in September they surged beyond what we normally see during this season…I would attribute this jump to record-low interest rates and an abundance of buyers in the marketplace, including buyers of vacation homes given the greater flexibility to work from home.”
Many of the people being drawn to the market right now are young people who previously thought home buying was out of reach for them. In fact, the current homeownership rate for millennials is just 39.5%. But now 49% of millennials say COVID has pushed them to buy a home sooner than their original timeline.
Here’s a look at what the market looks like right now and how it affects you.
What’s Drawing So Many Buyers to the Market?
As Yun mentioned, record-low interest rates are key. Today’s rates are strengthening purchasing power for buyers, too. Sam Khater, Chief Economist at Freddie Mac, emphasizes:
“Mortgage rates today are on average more than a full percentage point lower than rates over the last five years.”
If you’re a home buyer right now, there’s no question that you want to take advantage of this opportunity. But unfortunately, you’re not alone. Competition among buyers is definitely increasing as more buyers enter the market and mortgage interest rates remain so low.
Who’s Planning to Buy a Home Right Now?
Today’s affordability appeals to all generations. However, it seems to be especially attractive to younger buyers who want to begin growing their wealth through homeownership. There’s a distinct increase this year in the percentage of those in younger generations searching for homes. The National Association of Home Builders (NAHB) notes:
“Between the third quarters of 2019 and 2020, the share of Gen Z adults planning a home purchase rose three points to 14%. Millennials, however, are the generation most likely to be considering buying a home (22%).”
According to Mark Fleming, Chief Economist for First American, millennials are reaching their prime home-buying years, a likely driver in this increase:
“Record low mortgage rates and millennials continuing to age into their prime home-buying years has boosted demand, but a lack of housing supply remains a challenge.”
What’s the Biggest Challenge for Today’s Buyers?
Finding a home, however, as Fleming notes above, is clearly a challenge today. Yun also explains:
“There is no shortage of hopeful, potential buyers, but inventory is historically low.”
Home sellers are feeling anxious about the prospect of selling their homes. In fact, in a recent study, 26% of homeowners said they don’t want to sell their homes because they are concerned they won’t be able to find and/or afford a new home. Furthermore, the ability to refinance and growing home equity are also encouraging people to live in their homes for longer than they have in the past. These factors are contributing to the very tight inventory right now.
What This Means For You
With so many buyers actively searching for homes this year and so few houses for sale, it’s more important than ever to work with a trusted real estate professional. A local expert like The Shannon Jones Team can help you navigate today’s market in the area you want to look at. From pre-approval to bidding wars and guidance on down payment assistance resources, having an agent by your side might make the difference in your ability to land your dream home.
Furthermore, getting into the market as soon as you can is extremely important. Now is not the time to sit on the sidelines waiting for prices to go down, because there’s no guarantee they will. Sitting down with an experienced agent what entering the market will look like. To start looking at homes in Southern California, please reach out to us. We are always happy to help experienced buyers and first-time buyers! Just give us a call at 562.896.2456 or fill out the form below. We look forward to helping you find a home!