Motivated by low interest rates, last year people across Canada were on the move to wherever their telecommuting hearts desired. But will the trends continue in 2021?
Those looking to buy or sell a home in early 2021 might want to keep in mind the three “I’s”: Interest rates, inventory and internet access (and the relocation possibilities it opens up!).
Experts anticipate the housing market frenzy from 2020 – one of the busiest on record, despite a slowing economy, stay-at-home orders and, well, everything – will carry over into the new year.
“Over the past year, people re-evaluated what they wanted in a home and many decided to move or upgrade,” says Nick Bailey, Chief Customer Officer for RE/MAX. “Low interest rates helped increase budgets for first-time homebuyers, and sellers are getting top dollar for their home.”
While many still prefer the city lifestyle, more and more homebuyers seem to be taking advantage of telecommuting to move to less expensive areas of the country.
“Working remotely has offered many buyers the flexibility to relocate to lower-cost markets,” Bailey says. “That explains, in part, why buyers are leaving expensive but close-to-work metro areas like San Francisco. Without a commute to consider, relocating to a less expensive city becomes a possibility.”
The housing market may be competitive, but there are plenty of ways both buyers and sellers can win – especially when working with an experienced real estate professional. Here’s what those navigating the market in 2021 need to know.
- Low interest rates help with affordability – but they won’t be around forever
According to Ige Johnson, Broker/Owner of RE/MAX Generation in Humble, Texas, historically low interest rates have motivated many renters to transition into homeownership.
“A lot of my clients were still waiting to buy a home, but lower interest rates have helped encourage them to get off the fence,” Johnson says. “It makes a big difference. The lower interest rates mean a monthly payment may be as much as $100-$200 lower, or buyers can expand their budget significantly.”
Yet Alison Malkin, a Broker/Owner of RE/MAX Essentia in Avon, Connecticut, and a former mortgage professional, said she doesn’t see the sustainability of interest rates remaining at such a low level in the long term and expects they will edge up over the upcoming year.
“What is great is that for now, there’s no question the low rates are impacting the market and helping it to keep moving,” Malkin says.
Bailey also foresees a change to rates in the coming year.
“These historically low rates are likely to begin to tick up in 2021,” he says. “First-time homebuyers looking to take advantage of low rates should consider getting into the market now.”
- Low inventory is pushing prices higher – but a real estate agent knows how to negotiate a win
The high number of buyers entering the market due to low interest rates is compounding with several other factors to create record low inventory – and high prices – in several areas of the country.
“Affordability is always a potential concern, but the low interest rates make buying attractive and possible for many people,” Bailey says. “As things stabilize and pull more sellers into the market, we should see some gains in both inventory and balance. But even now, despite the lack of available options, buyers across the country are finding properties that work well for them – as long as they’re ready to act quickly when they do.”
In the meantime, both Johnson and Malkin say they try to emotionally prepare their clients for navigating the competitive market.
“I tell them we’ll likely be going up against multiple offers and may have to look a little bit longer to find the right home,” Johnson says.
Malkin has seen many homes in her market sell for well above the asking price. She makes sure her clients are prepared to make offers on several homes before one is accepted. Buyers who come to the transaction ready to make a cash offer can be at an advantage.
Yet there are a several reasons for someone to sell a home – and a winning bid may not always be the highest.
“There are a variety of reasons why someone will choose an offer, so I don’t tell buyers not to try,” Malkin says.
The market is so competitive that Malkin says she often sees offers come in at prices above what she thinks the homes will appraise for – and buyers willing to make up the difference. If she’s representing a seller in this scenario, she pre-negotiates an agreement with the buyer’s agent as to how an appraisal shortfall will be absorbed. She also collects documentation that the buyer has the ability to cover that shortfall.
“With this market, contract negotiation is more important than ever to ensure a smooth transaction that works for both sides. It can be difficult for a first-time homebuyer, or any homebuyer, who doesn’t have as much money to put down to compete. That’s why I feel it’s more important than ever to work with an agent who knows how to navigate the market.”
Working with an experienced agent cannot be overstated, according to Johnson.
“I think having a real estate professional that is really strong in negotiating really helps,” Johnson says. “There are different strategies I can put into a contract, for example offering more earnest money, that can help us beat out other offers. A flexible timeline can also be an advantage. Some sellers may need more time to prepare for a move, while others may be looking for a quick closing time.”
- It’s a difficult market to be picky in – but it’s OK to have a wish list
What are buyers looking for in a home? After a year of social distancing, space is at a premium, according to Bailey.
“Many buyers are looking for amenities such as home offices, outdoor space, and even package rooms,” he says. “Some are looking for in-law suites to bring the family under one roof, whether it’s today or planning for future needs. Even if it’s not occupied full-time, an in-law suite gives visiting family and friends their own space to unwind.”
Johnson says the number of clients looking to accommodate aging relatives, already a trend for the past few years, has only grown during the pandemic. Buyers are looking for homes that easily allow for family members to enjoy privacy in their own space.
“Some buyers prefer for the primary suite and the guest room to be downstairs – that way parents that may be getting older and coming to live with you won’t have to worry about the stairs, or if you have friends over the kids can have their own space upstairs.”
In addition to bringing parents home, Malkin says she’s also seen an increase in families investing in a home together.
“We’re seeing clients buy a duplex where the parents live on one side and the children live on the other,” she says. “I also know of a family that moved here from New York. I don’t think any of them make more than $30,000 a year, but now that they’re able to telecommute together, the three of them have been able to purchase a home in our part of Connecticut.”
Sellers may not be able to control their square footage or access to outdoor space, but Malkin says there’s one thing they can consider to make their home stand out: renovations.
“Even with such a competitive seller’s market, the basic mindset of buyers has not changed. If buyers have a choice between an updated or upgraded home and one that is not, they will always go for the home with renovations. Homes needing work tend to linger on the market just as they normally do.”
Malkin consults with her clients on which updates could be most beneficial to their home’s resale value. It’s always a case-by-case basis and her recommendations will vary with each home.
“It’s specific to each house and each seller,” she says. “Together I work with clients to evaluate where they may get the most money with an upgrade, or what they can expect if they market their home as-is. Sometimes an update as simple and low-cost as a fresh coat of paint can go far in increasing the appeal of a home.”
All of these factors make working with an agent even more critical in 2021, according to Bailey.
“Now more than ever, working with an experienced agent can make the difference in getting the house you want, the most money for a home you’re selling, or even feeling secure and confident throughout the complex process of real estate,” Bailey says.