I believe Fall 2021 is going to be remembered as one of those turning point moments in the real estate market. Why do I say that? Let’s first start by briefly setting the stage of where we are today.
Year to date stats as of November 1st 2021:
|Days on Market Until Sale||31||15||51.6%|
|Median Sales Price||$285,000||$325,000||14%|
|Percentage of Original List Price Received||99.4%||102.9%||3.5%|
As is clearly shown in the above data, the real estate market in Richmond has been on a rocketship trajectory especially after the recoil following the Covid-19 pandemic in the middle of 2020. With home pricing rising on average a whopping 14% so far just in 2021. Average time to sell has also been slashed in half as compared to last year (which was also a record breaking year). All of this has been great for property owners that were looking to sell or refinance.
While many have opinions and reasonings as to why they think we have seen such an incredible explosion in property values, my boots on the ground view is telling me that the following are the largest influencers:
1– The largest generation to ever exist in the United States (Millennials) has decided that NOW is the time to buy a home.
2– Expendable cash has risen tremendously with the deployment of small business, unemployment and pandemic stimulus funds.
3– Interest rates sunk to absurdly low rates that allowed superior leverage to home buyers.
4– The “Great Reshuffling” effect that motivated buyers and families to change their living situation and/or move based on the advent of work from home opportunities.
5– The second largest generation ever (Baby Boomers) are now empty nesters and retiring, with downsized low-maintenance living and vacation homes in short supply.
While there are certainly many other ancillary causes, the bottom line is that there has been too much demand and too little supply on the majority of the real estate market. Occupying buyers and investors have been left scrambling and in the middle of brutal bidding wars.
So with all that record-breaking trailing data, why would I say that Fall 2021 will be a memorable real estate market? Because change is in the air and it’s not just the cold. Here are a few interesting indicators:
1– Interest rates are climbing and will continue to climb as a result of the fastest inflation in 31 years.
2– Investors and data aggregators sense that the rate of appreciation is set to level back towards the normal.
3– The number of completed new homes and the pace of permits for new housing dropped in September.
4– Homebuyer fatigue is real and the overall market is becoming more risk averse.
5– Home values are becoming out of reach for many first time home buyers.
6– In my daily conversation, it seems that many property owners are sensing that we are approaching the pinnacle of value in this cycle and that soon may be the best time to sell.
So does this mean we will have a real estate crash in 2022 and that home prices are going to drop? No, it doesn’t.
But, we will begin to feel the change as we trend towards a more balanced market. Inventory should improve as more owners decide to catch the tail end of this wave and the foreclosure moratorium has been lifted.
Closer to “normal” appreciation rates should be expected and time to sell will reach a more tolerable level. We will continue to be housing stressed for the foreseeable future as the Millennial buyers stretch the market to fit their needs, but without a doubt in my mind – we have approached the crest of this frenzied market and it appears that it could be just in time to evade a bonzai pipeline style crash and will instead become a long rolling wave ride that we will remember for a long time.
10+ year industry veteran and multiple-time Distinguished Achiever award winner and 2017 Richmond’s Finest Business Professional