Most cities across the United States experienced “seller’s market” real estate conditions during 2020, despite a pandemic and economic slowdown. And based on current housing trends, we expect this to continue for the foreseeable future.
Overall, it’s still a seller’s real estate market in 2021. Anyone planning to buy a home in 2021 should be prepared for stiff competition.
Tight supply conditions and strong demand have made the housing market highly competitive and fast-paced. Quick sales and multiple offers are the norm for many, if not most, U.S. cities.
It’s Still a Seller’s Market in 2021
Housing-related conditions can vary widely from one city to the next. But overall, the U.S. is still in a seller’s real estate market.
It’s a supply-and-demand story, as always.
Low mortgage rates and a pandemic-fueled desire for homeownership and space have increased demand within housing markets all across the country. At the same time, real estate listings and overall inventory levels have declined sharply.
The end result is a serious imbalance between supply and demand. In short, there are lots of buyers actively seeking homes, but not enough properties to meet the demand. This has created a classic seller’s market in many U.S. cities, while boosting home values at the same time.
Fewer Homes for Sale Than a Year Ago
In February 2021, the national real estate brokerage Redfin reported that the number of active property listings in the U.S. had declined 40% from 2020 levels, reaching an all-time low. In other words, there are far fewer homes listed for sale today than a year ago.
A similar report from the research team at Realtor.com showed that the number of homes for sale in January 2021 was down by 42.6% year-over-year. That translates into 443,000 fewer homes listed for sale in January 2021, compared to a year earlier.
That’s some serious “shrinkage.”
The biggest inventory declines occurred in hot real estate markets with significant population growth and in-migration. These include Austin, Texas; Riverside, California; and Raleigh, North Carolina.
Of the 50 metro areas analyzed in this report, 48 of them experienced a decline in the total number of “active listings.” Only two metros — San Jose and San Francisco — experienced an increase in property listings.
The table below shows the ten metro areas where housing market inventory (active listings) fell the most from January 2020 to January 2021. It’s based on the Realtor.com analysis mentioned above.
|Metro Area||Active Listings, YoY|
|Austin-Round Rock, Texas||-67.40%|
|Riverside-San Bernardino-Ontario, Calif.||-60.60%|
|Dallas-Fort Worth-Arlington, Texas||-54.80%|
|Tampa-St. Petersburg-Clearwater, Fla.||-53.00%|
With significant inventory declines, these metro areas (and many others) have shifted even further into seller’s market territory.
Properties Are Selling Fast (as You Would Imagine)
A national real estate report issued in February showed that homes are selling rapidly in many parts of the country.
This is another indication of a strong seller’s market. And it’s not at all surprising, when you consider the lopsided supply and demand conditions mentioned at the start of this article.
According to the February 2021 Redfin report, 43% of homes that went under contract in January 2021 had an accepted offer within one week of hitting the market. That was an increase from 30% a year earlier, marking an all-time high for this particular measurement.
A seller’s real estate market is usually brought on by low inventory and strong demand. And we have clearly checked those boxes. A number of industry reports have shown that home sales increased over the past year while inventory declined (at least in most parts of the country).
A Highly Competitive Real Estate Market in 2021
All of these reports, trends and statistics indicate that we are still in a seller’s market in 2021. While inventory is expected to increase a bit going forward, the U.S. housing market will probably continue to favor sellers over buyers for the foreseeable future.
In February, Realtor.com’s chief economist Danielle Hale issued the following warning to home buyers in the U.S.:
“Those thinking of getting into the market this spring should brace themselves for a competitive season, especially in the market for existing homes.”
In many parts of the country, real estate competition is highest at the lower end of the price spectrum, where first-time buyers tend to shop. So-called “starter homes” are in high demand but short supply these days. First-time buyers beware.
A Short ‘Survival Guide’ for Buyers
Buying a home in a seller’s market requires a particular set of skills, to borrow a phrase from Taken.
The most important thing is to understand what’s going on within your local real estate market. Conditions can vary widely from one city or region of the country to the next. While much of the U.S. is experiencing a strong seller’s market right now, some cities and metro areas are a bit more balanced.
But regardless of where you live, it’s safe to assume that conditions favor sellers over buyers. That’s the current reality for most of the country.
So, what’s a home buyer to do in challenging times like these? How do you navigate such a highly competitive real estate scene? How do you buy a house in a seller’s market?
Here are some tips and strategies to help you succeed:
1. Make a strong first offer.
Thinking about low-balling the seller to score a good deal on a home purchase? Better think twice.
You might get away with that kind of tactic in a sluggish market, where there are plenty of homes for sale but fewer buyers. But that’s the exact opposite of where we are right now, in early 2021.
In a seller’s real estate market, home buyers can benefit by putting a strong offer on paper — right from the start. Leverage your agent’s expertise and knowledge of local market conditions. Look at recent home sales with an eye toward their sale prices. Figure out what similar homes are selling for in the area where you want to buy, and base your offer on that.
2. Expand your search box.
Sure, you might want to live in that quaint little neighborhood that’s close to your work. But there’s always a chance you won’t find any homes for sale in the neighborhood that fall within your price range.
And even if you do, there might be dozens of other buyers lined up to purchase that same property. Such are the times.
The point is, you have to be flexible and open-minded in terms of where you want to buy. While most of the country is in a seller’s market in 2021, housing competition can vary from one neighborhood or town to the next.
The same goes for inventory levels. You might have a much easier time buying a home just by shifting one zip code away from your first-choice location.
3. Accept current market realities.
We tend to see a lot of all-cash offers in a seller’s real estate market. When demand begins to exceed supply, many buyers and investors use all-cash offers to outfox the competition.
If you’re using a mortgage loan to buy a home in 2021, you have to accept this harsh reality. There might come a time when you’re competing against one or more cash offers. And as they say, cash is king.
Be patient and persistent with your home search, but be realistic as well. The truth is, it’s a tough time to buy a home in many parts of the country.
Disclaimer: Housing conditions can vary greatly from one city to the next. As a result, some of the trends mentioned above might not apply to your situation. Conduct thorough research to find out what’s happening in your local real estate market. Home-buying success starts with knowledge.