Demand for Vacation Homes Is Still Strong

The pandemic created a tremendous interest in vacation homes across the country. Throughout the last year, many people purchased second homes as a safe getaway from the challenges of the health crisis. With many professionals working from home and many students taking classes remotely, it made sense to see a migration away from cities and into counties with more vacation destinations. The 2021 Vacation Home Counties Report from the National Association of Realtors (NAR) shows that this increase in vacation home sales continues in 2021. The report examines sales in counties where “vacant seasonal, occasional, or recreational use housing account for at least 20% of the housing stock” and compares that data to the overall residential market. Their findings show:

• Vacation home sales rose by 16.4% to 310,600 in 2020, outpacing the 5.6% growth in total existing-home sales.

• Vacation home sales are up 57.2% year-over-year during January-April 2021 compared to the 20% year-over-year change in total existing-home sales.

• Home prices rose more in vacation home counties – the median existing price rose by 14.2% in vacation home counties, compared to 10.1% in non-vacation home counties.

This coincides with data released by Zelman & Associates on the increase in sales of second homes throughout the country last year. As the data above shows, there is still high demand for second getaway homes in 2021 even as the pandemic winds down. While we may see a rise in second-home sellers as life returns to normal, ongoing low supply and high demand will continue to provide those sellers with a good return on their investment. Bottom Line If you’re one of the many people who purchased a vacation home during the pandemic, you’re likely wondering what this means for you. If you’re considering selling that home as life returns to normal, you have options. There are still plenty of buyers in the market. If, on the other hand, you want to keep your second home, enjoy it! Current market conditions show that it’s a good ongoing investment.

Hope Is on the Horizon for Today’s Housing Shortage

The major challenge in today’s housing market is that there are more buyers looking to purchase than there are homes available to buy. Simply put, supply can’t keep up with demand. A normal market has a 6-month supply of homes for sale. Anything over that indicates it’s a buyers’ market, but an inventory level below that threshold means we’re in a sellers’ market. Today’s inventory level sits far below the norm. According to the Existing Home Sales Report from the National Association of Realtors (NAR): “Total housing inventory at the end of April amounted to 1.16 million units, up 10.5% from March's inventory and down 20.5% from one year ago (1.46 million). Unsold inventory sits at a 2.4-month supply at the current sales pace, slightly up from March's 2.1-month supply and down from the 4.0-month supply recorded in April 2020. These numbers continue to represent near-record lows.” Basically, while we are seeing some improvement, we’re still at near-record lows for housing inventory (as shown in the graph below). Here’s why. Since the pandemic began, sellers have been cautious when it comes to putting their homes on the market. At the same time that fewer people are listing their homes, more and more people are trying to buy them thanks to today’s low mortgage rates. The influx of buyers aiming to capitalize on those rates are purchasing this limited supply of homes as quickly as they’re coming to market.This inventory shortage doesn’t just apply to existing homes that are already built. When it comes to new construction, builders are trying to do their part to bring more newly built homes into the market. However, due to challenges with things like lumber supply, they’re also not able to keep up with demand. In their Monthly New Residential Sales report, the United States Census Bureau states: “The seasonally‐adjusted estimate of new houses for sale at the end of April was 316,000. This represents a supply of 4.4 months at the current sales rate.” Sam Khater, Chief Economist at Freddie Mac, elaborates: “In the span of five decades, entry level construction fell from 418,000 units per year in the late 1970s to 65,000 in 2020. While in 2020 only 65,000 entry-level homes were completed, there were 2.38 million first-time homebuyers that purchased homes. Not all renters looking to purchase their first home were in the market for entry-level homes, however, the large disparity illustrates the significant and rapidly widening gap between entry-level supply and demand.” Despite today’s low inventory, there is hope on the horizon. Regarding existing home sales, Sabrina Speianu, Senior Economic Research Analyst at realtor.com, explains: “In May, newly listed homes grew by 5.4% on a year-over-year basis compared to the earlier days of the COVID-19 pandemic last year… In May, the share of newly listed homes compared to active daily inventory hit a historical high of 44.4%, 17.3 percentage points higher than last year and 15.1 percentage points above typical levels seen in 2017 to 2019. This is a reflection of quickly selling homes and, for buyers, it means that while they can expect fresh new listings every week, they will have to be prepared to move quickly on desirable homes.” As for newly built homes, builders are also confident about what’s ahead for housing inventory. Robert Dietz, Chief Economist at the National Association of Home Builders (NAHB), shares: “Builder confidence in the market remains strong due to a lack of resale inventory, low mortgage interest rates, and a growing demographic of prospective home buyers.” Things are starting to look up for residential real estate inventory. As the country continues to reopen, more houses are likely to be listed for sale. However, as long as buyer demand remains high, it will take time for the balance between supply and demand to truly neutralize. Bottom Line Although it may be challenging to find a house to buy in today’s market, there is hope on the horizon. Let’s connect to talk about your home search so we can find your dream home this summer.

Dreaming of a Bigger Home? Why Not Buy it This Year?

Are you clamoring for extra rooms or a more functional floorplan in your house? Maybe it’s time to make a move. If you’ll be able to work remotely for the long-term or your overall needs have simply changed, it’s a great time to sell your house and move up. Why? With mortgage rates in their favor and higher-priced home sales powering more moves across the country, sellers in today’s market are finding the space they need (and have always dreamed of) by purchasing a home in the upper end of the housing market. With so few homes available for sale and high demand from today’s homebuyers, sellers are profiting in major ways this season. Bidding wars are gaining traction, driving up the sale price of more and more homes throughout the country. This means sellers are able to leverage extra cash from higher-priced sales while also taking advantage of today’s low mortgage rates when they purchase their next home. It’s the perfect scenario to move up into a tru

e dream home. According to the April Luxury Market Report from the Institute for Luxury Home Marketing: “The Institute’s recent analysis of sales in 2020 for homes over 5,000 square feet support the continuing preference for larger homes. The analysis determined that there was a 17% increase in the number of 5,000+ sq ft homes sold when compared to the number of sales in 2019. Luxury home prices continue to see record highs in the majority of affluent ex-urban communities, as the influence of being able to work from home is still driving buyers away from living in high density areas. Low interest rates also remain in play, allowing buyers to realize the affordability of owning a larger property, which further reinforces this trend.” Lawrence Yun, Chief Economist for the National Association of Realtors (NAR), also explains: “The market is hot pretty much everywhere and across all price points . . . The only area where there is sufficient inventory is in $1 million-plus homes . . . .” While this price range certainly doesn’t fit every budget, if it’s in your reach this summer, you may want to make your move sooner rather than later. Today, more homes are available in this segment of the market, but as the report mentions, more buyers are investing here too, so competition may heat up sooner rather than later. Bottom Line If you’re planning to sell your current home to move into a larger one, let’s connect today. We’ll discuss your current situation and the opportunities in our local market.