HOME SALES HIT A 14 YEAR PEAK IN 2020
By: Mark H. Stowers
Home Sales Prove Beneficial for Sellers
It’s good to be the seller in today’s housing market. With a micro-inventory of available homes and sizzling low rates, home sales hit a peak in 2020 with no ceiling in sight. According to the National Association of REALTORS®, “existing-home sales in 2020 surged to the highest level in 14 years, landing 22 percent higher than a year ago.” Nationally, existing-home sales have continued to rise year over year and rose by 0.7% in December 2020 compared to November 2020’s already unusual high rates.
Jim Shaffer, founder and CEO of Jim Shaffer and Associates Real Estate, offers a peek behind the curtain in the Michigan housing market. Sales for his office continue to rise, even with declining inventory.
“It seems to be continuing through 2021 even with it being a bit more dire today as far as low inventory. Low inventory is still being driven by historically low interest rates and the other is that the millennials have entered into this market at an unprecedented pace. It’s like something in their biological clock went off and they need to buy a house.”
Shaffer notes there are two key factors that led to low inventory – one hidden and one quite evident. First, during the economic downturn of 2005 to 2012 when the housing market crashed, homes actually vanished from the housing market inventory.
Home Sales
Local inventory from 2018 to the present
“So many of the houses that left the market due to foreclosure never came back to the market,” Shaffer said. “The banks were always talking about this ‘ghost inventory.’ There were far more homes being foreclosed on than were being reported.”
These homes were actually being bundled in packages, sometimes in the hundreds, and being bought up by Investment groups and turned into rental properties, according to Shaffer.
“The first-time home-buyer segment, that three bedroom, one bath house, are now owned by rental management companies – hundreds of thousands of homes across the United States. But what is happening, the low interest rate can be locked in by first time buyers and they can afford to buy a $300,000 home whereas you and I could have bought a $100,000 or $150,000 house for our first home.”
The second factor more visible is that when the economic downturn hit, builders pulled way back on building new homes.
“The entire housing market depends on new builds so people move up into those new properties. Those new build starts didn't happen for a decade. They built a few here and there but not at the rate they previously did. They didn’t build full subdivisions but one fill lots here and there.”
In 2020, Jim Shaffer and Associates served 769 families to buy and sell real estate. The office is looking to up that ante for 2021.
Jim Shaffer and Associates
“Our goal for 2021 is to serve 1,000 families,” Shaffer said. “There may be less home sales but there will be spikes in the cost of housing because of the shortage of housing. Every time we have a closing, we’ve set a new record on that street or in that neighborhood.”
The housing market continues to thrive, even with less inventory. During the pandemic, real estate agents found creative ways to show and close on homes throughout the country. In 2021, the housing market will continue to be a sellers’ market with low inventory and literally hundreds of thousands of new millennial buyers seeking a home.