End of Year 2020 Market Snapshots
As we wrap up the most ridiculous year of most of our lives, Greater New Orleans home prices rise as supply continues its 10-year decline.
This year’s real estate market has ended exceptionally well. The global pandemic could have destroyed real estate. Instead, however, housing inventory continued its nearly 10-year long downward trend, fueled by a record-long expansion and low unemployment (pre-COVID-19), historically low interest rates, and a sizable new generation of buyers entering the market as older generations were choosing to hold onto their homes. A sharp drop in new homes coming online was also a key player.
Interest Rates Spur Home Sales
Already-low interest rates hit a 65-year low in 2020. The average interest rate for a 30-year mortgage hovered around 3.5% in January 2020, and near the end of the year, some well-set buyers were seeing rates as low as 1.5%. This increased buying power for those entering the market, by allowing buyers to borrow up to 24% (twenty-four!) percent more while keeping their house payment the same. Consumer confidence increased, and those that were on the fence about buying (both investors and owner-occupiers) were forced to make the jump. This housing slump combined with increased demand also means that many buyers who try to offer much (if any) under list price will miss out on homes. Low interest rates (see above) seem to be calming much of the anxiety buyers have about offering closer to list price, however.
Supply and Demand
This last chart shows what we all learned in our econ classes: Sales prices hit a historic high as supply tanked and demand went through the (thankfully proverbial) roof.
Is now a good time to sell?
Traditionally, we see home sales drop in the fourth quarter, and then start to increase at the beginning of Q1 again. Given how much the pandemic has changed, well, everything, I would expect a somewhat muted jump in supply, and demand will likely continue to increase, especially with the possibility of additional stimulus money going out to many Americans. So yes, this is your time!
