You have probably read or heard about the state of our local real estate market. If you have not, it is about as hot as it can get. The Reno Spark association of realtors reported a median sold price of $435,000 in July, which is a new record. Furthermore, listing inventory is down by 52% while total closed sales are up over 18% year-over-year. In other words, if you are considering a home purchase this summer, you will find yourself in very brisk market. The question is, “What is driving this boom”? Here are a few trends that I am seeing in real-time.
Many are spending more time at home: Those of us that have the option of working from home are getting used to it, some are thriving. In fact, the Global Workplace Forecast recently estimated that 25- 35% of the US work force will be working from home by the end of 2021. Added to that is the Gartner Inc survey of 317 CFO’s which reveals that 74% of them are planning to shift at least some of their workforce to permanently remote. For some people, their home is becoming their perpetual office.
Mortgage interest rates are historically low: Fannie Mae reports that they are about to get lower, Their August 2020 forecast predicts that rates will drop to 2.7% by the end of this year. If you’re taking out a $400,000 mortgage that’s a $400 per month discount over the 4.5% rate buyers were obtaining this time last year. As prices are going up, rates are going down which has created a bit of a hedge for many buyers.
Restrained Demand in the 1st quarter: For most of us in this industry business pretty much fell off a cliff in late February through April. In May and June, the Mortgage Bankers Association reported that mortgage applications increased for nine consecutive weeks and recently hit the highest level in over 11 years. Many of these pre-approved buyers are out house-hunting now and if you are one of them, I am sure you’re finding the traffic to be shoulder-to-shoulder.
The Scarcity Effect: This is a cognitive bias that causes people to perceive a higher value because the item is scarce. I have never compared a house to a pack of toilet paper, but I think we can do so now. I’ve had as many as five competing offers on my recent listings and have heard rumors of 10 – 12. Adding to the challenge and partially due to the slow first quarter, appraisals are not keeping up. I recently closed a home that despite our receiving three offers over list price, appraised for $55,000 less than the winning bid. Fortunately for us, that winning buyer waived the appraisal as a contingency in their contract and we did close at the agreed upon price, on time.
Despite all this plus a pandemic, life continues to happen. People still change jobs and get married, they have babies, get promoted and retire. If you are one of those folks, or simply feel it’s time for a change, give me a call, I can help. dan@nvhomeconnections.com