You have probably read many headlines claiming the housing market to be “Getting Back to Normal.” That would have to mean that the housing market numbers are similar to those we saw before the pandemic from 2015-2019. But that’s not happening. The market is still extremely vibrant as demand is still strong even while housing supply is slowly returning.
Let’s take a look at some numbers, but before that here’s the definition of normal from the Merriam-Webster Dictionary:
“conforming to a type, standard, or regular pattern: characterized by that which is considered usual, typical, or routine.”
Using this definition, here are five housing industry metrics that prove we’re nowhere near normal.
1. Historically Low Mortgage Rates
Mortgage rates have been falling since 2018 when it was a 5 year high of 4.94% average rate. The rates plummeted in 2020 as a result of the pandemic and have been at a record low in January 2021. If we look at the 30-year mortgage rate chronicled by Freddie Mac, we can see the average rates by decade:
- 1970s: 8.86%
- 1980s: 12.7%
- 1990s: 8.12%
- 2000s: 6.29%
- 2010s: 4.09%
Today, the average mortgage rate stands at 2.87%, which is very close to the historic low. Although the average rate is a bit higher compared to 2020’s low rates, they are still much lower than the rates of 2019. Low interest rates give borrowers more buying power and the significant decline in mortgage rates also push for home prices to go up as we saw in recent months.
Currently, mortgage rates are anything but usual, typical, or routine.
2. Home Price Appreciation
We are now at a point where we can compare the real estate market at the beginning of the pandemic to the real estate market right now. The housing market was going pretty strong before the Pandemic, the Covid-19 response was unprecedented. In March of 2020, it seemed as if the Real Estate Market was declining at an alarming rate due to the widespread stay at home orders. However, the low interest rates allowed homebuyers to keep the market afloat. In 2021, the market saw a continuous rise in home prices and is a sign that the Housing Market is Still Hot.
According to Black Knight, a housing data and analytics company, the average annual appreciation on residential real estate prices since 1995 has been 4.14%. According to the latest forecast from the National Association of Realtors (NAR), home price appreciation will hit 14.1% this year, which will be greater than any year since Black Knight began collecting this data.
Currently, home price appreciation is anything but usual, typical, or routine.
3. Months’ Supply of Inventory (Homes for Sale)
According to NAR:
“Months’ supply refers to the number of months it would take for the current inventory of homes on the market to sell given the current sales pace. Historically, six months of supply is associated with moderate price appreciation, and a lower level of months’ supply tends to push prices up more rapidly.”
As of the latest Existing Homes Sales Report from NAR, the current months’ supply of inventory stands at 2.6. That’s less than half of a normal supply. New Homes are coming on the market pretty much every week but are also being sold quickly. Historically, six months of supply is associated with moderate price appreciation, and a lower level of months’ supply trends to push prices up more rapidly.
As we can see, the months’ supply rate is nothing like before.
4. It Takes Less Days To Sell Home
The days-on-market metric gives an indication of how hot a market is and how quickly homes are selling. In 2019, prior to the pandemic, the average days on market stood at 35, according to NAR. Today, that number is cut in half and is now at 17 days. A low average Days on Market indicates a strong market that favors the sellers. The real estate market has emerged as a boon for sellers and a source of worry for buyers in the middle of this epidemic.
5. Number of Offers per Listing
With the rising demand for homes, buyer competition has started to intensify. According to NAR, the number of offers per listing stood at 2.2 in 2019. Today, that number is double at 4.5. These numbers make buying competitive enough that sometimes buyers may have to offer above asking price.
Bottom Line
When…
- Mortgage rates are near historic lows
- Price appreciation is at historic highs
- Housing inventory is less than half of the normal amount
- The time it takes to sell a home is cut in half, and
- There are twice as many offers on each house
…it’s hard to say we’re in a normal market.
Looking to Sell Your Home?
As you can tell, it’s a great time to sell your home considering the high demand for homes and rising home prices! Use our Home Valuation tool to find out what’s your home worth and contact us to set up a Seller’s Consultation.
