Laura Ellis is president of residential sales and the executive vice president of Chicago-based Baird & Warner.
Last summer after the start of the pandemic, we saw the housing market escalate with swift sales and soaring prices as people realized they wanted a change of scenery, more space or both. This year, dynamics continue to break the mold as they are unlike what we’ve seen before with continued low inventory and interest rates, yet high demand.
In fact, summer 2021 is already on pace to set new records with May median existing-home prices exceeding $350,000, the biggest year-over-year price increase in over a decade, and 24% higher than a year ago, according to the National Association of Realtors (NAR). And while prices have continued to rise, days on market have decreased. Zillow recently reported that May homes typically sat on the market for six days or less before going under contract, one day less than in April.
With so many unprecedented shifts in the market, an experienced agent can offer buyers and sellers not only the best offense but also defense. Here are three ways the summer 2021 housing market is a whole new ballgame than 2020 and why an agent is your best asset.
1. FOMO Motivation
New construction slowed dramatically during and after the Great Recession, despite the rise in new buyers and household formation. The result is that supply has fallen short of demand and inventory still lags.
When the market first started to heat up last summer, one strong motivating factor for buyers was the ability to take advantage of low interest rates as many economists had predicted an upward trend. But now, as we’ve seen interest rates stay relatively steady and the Fed has signaled the earliest a rate hike would happen is 2022, the new impetus for buying a home this summer is low inventory. People know there’s a limited number of for-sale homes and feel an urgency to seize the moment before they miss out.
For sellers, working with an agent on an optimum sales and pricing strategy can help generate the best offer — or offers, as multiple offers are no longer the exception, but the norm in today’s frenzied climate. And buyers who pair with an agent can gain access to listings both on the MLS and off, such as a coming soon private listing, for a broader field of available homes.
2. Creative Offers Win The Bid
Limited inventory has become all too commonplace this summer. In the Chicago metro area alone, we’ve seen at least a 25% reduction in available listings. This contrast between available homes and market demand has resulted in even the most undesirable listings getting second and third glances.
More than ever, buyers need to be smart and creative in their offers and the best step forward is working with an agent who knows how to structure an offer that will stand out to a seller in a sea of offers. Having worked in an aggressive housing market for months, agents today are better positioned to talk to buyers about the possibility of paying over asking and potentially adding an escalation rider to approve paying more in the likely event of a bidding war. Buyers are even waiving appraisal contingencies in some cases and offering to pay the difference in cash. That’s a vastly different situation than when buyers used to leverage a lower appraisal to negotiate a lower price.
An advantage that agents can pass on to sellers is the ability to access real-time market knowledge to help prioritize the best offers ASAP. It’s not uncommon for agents today to create spreadsheets highlighting multiple-offer scenarios in order to help clients make a well-informed decision. With so many people traveling this summer and starting their return to the office — quite the difference from last summer — everyone is finding themselves busier than ever, which makes an agent’s personalized level of advisory services a critical timesaver in helping sellers quickly assess and accept the best offer.
3. Know What To Expect When You’re Expecting A Topsy-Turvy Market
It’s obviously difficult to navigate the unexpected when you’re in uncharted territory. This market has many dynamics at play that simply go against the norms our industry has seen, so buyers and sellers need a true business partner at the table to have the best experience possible.
If a home is priced right, sellers need to expect to get at least one offer the evening after an open house. And buyers need to anticipate long lines at an open house and consider proposing various concessions that will help elevate their offer to the top. The summer market is hotter than ever, which means we need cool heads to prevail.
For buyers to have the winning offer for their next home, they need to work with an agent who knows what resonates with sellers in that neighborhood and can help them structure the deal or get creative.
While it is a fast-paced market and curveballs could come your way, the fundamentals are sound to support continued housing appreciation, making this summer still a great time to make a move to suit your lifestyle. Just make sure to have the right agent by your side to serve as your all-in-one expert adviser, financial guide and advocate.