Due to increasing demand for homes for sale, record low inventory levels, and rapidly increasing prices, real estate has been in the headlines almost daily. We receive a lot of questions from our clients, and I thought this would be a good venue to answer the three most common questions about the real estate market in 2021.
1. Are we in a bubble?
No. This is nothing like the frenzy before the financial meltdown where houses were purchased for speculation with zero down loans and closing costs put on a credit card at 18% interest. Those buyers were underwater the minute they closed on the house. The housing crash was caused because so many people did not have any equity in their homes and were over-extended. Stricter lending laws prevent a recurrence.
2. Will demand for rural markets wane when people go back to work?
The answer to that question is not as definitive. There are always urbanites that like city life and consider an outdoor café outdoor living. But for most, the natural beauty of our area is irresistible, and people that have vacationed here for decades are jumping at the chance to live here. If people no longer must commute to an office daily, they will choose the place that provides the lifestyle they cherish. It is hard to imagine that Seattle will recover physically or culturally soon., or that employees will not request to work from home at least periodically after enjoying the increased leisure time rather than spending 2 hours a day in traffic. Interest rates have started to creep up and continued increases will eventually impact entry-level to mid-level inventory, but the most recent increase has virtually no negative effect on demand. Eventually, however, the impact of Covid on the housing market will become less impactful and may take on more of the natural cycling of the population from cities to the suburbs to the city and back.
3. Will inventory increase as people get vaccinated?
We expect so, but it is not happening yet. Many older homeowners have been afraid to put their homes on the market because of Covid. As homeowners are getting vaccinated, they are more comfortable traveling to look at homes to purchase, as well as letting buyers inside of their homes. We expected to see inventory start to increase in Skagit County and Anacortes as it always does this time of year, but instead, inventory disappears due to pent-up demand. The end of tax season often signals a time when homeowners turn their attention to selling their home, but with the tax return extension this year that bump has been postponed. The summer market might not be the feeding frenzy it is now, but do not expect price softening across the board. There might be a few pockets of inventory created by an economic event such as a business location closing, but homes listed for sale will continue to experience a waiting line at the door when the house hits the MLS.
4. Should I sell now?
Financially, this is the best time to sell a home in my lifetime. Demand is high, inventory is low, and interest rates are low. The true economic impact of Covid has been artificially postponed. This is close to the peak of the real estate market, and it appears we will bounce around at this level through fall. Proposed changes in Capital Gain Taxes and the threat of the elimination of 1031 tax exchanges are likely to have an impact and influence investors to sell now.
The most important question is whether this is the right time for you to sell your home in Anacortes. If you plan to downsize, that process usually takes 6 months to 2 years. It is a great idea to start the process now even if you do not move right away.
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