The housing market, as millennials like to say, is on fire! In more pedantic terms, the burgeoning housing market signals for halcyon success this year. Despite the pandemic and shutdowns, or perhaps in light of them, southern states such as Florida and South Carolina are witnessing a record volume of home sales and reaping benefits of residents who prefer warmer climates, lower taxes, and less stringent shut downs. As the ability to work from home provides flexibility for families and professionals, many people, from the Northeast to the West Coast, are relocating to either the Palmetto State or the Sunshine State, creating a frenzy of real estate activity.
What can homeowners expect for 2021? Though no one has a crystal ball, leading industry experts expect the following trends for the new year.
Low interest rates
One positive from 2020 is mortgage interest rates. In a year when everything that could go wrong did go wrong, mortgage interest rates hit all-time lows. In fact, last month, the average 30-year fixed rate mortgage was 2.90%. The rate, which can vary one to two points, could be as low as 2.375%. Anthony Rice, Area Sales Manager with Bay Equity Home Mortgages, explains that “not only did rates hit all-time lows, they remained at or near those record lows throughout the year. And the good news is that most economists and market analysts anticipate that interest rates will remain at or near these record lows.”
According to a survey of major housing authorities such as Fannie Mae, Freddie Mac, and the Mortgage Bankers Association, the 30-year fixed rate mortgage will average around 3.03% through 2021. “This is a slight increase from the 2.90% we saw in late December, but still low enough to encourage potential homebuyers and those that may not have taken advantage of the rates in 2020 to finally get off the sideline,” advises Rice.
Of course, even though the outlook is advantageous for potential homebuyers, rates do fluctuate and change daily based on market conditions and buyer credentials. “For instance, someone with a high credit score will get a lower rate than someone with a low credit score,” explains Rice. Still, the overall low interest rates should motivate buyers and make for an active year in real estate.
High Sales Volume
Truncated time on the market equates to high home sales volume. Brad Millsap, Director of Operations for Mariner Sands Golf Club in Stuart, Florida, recalls that from July 1 to December 31, 2019, the club had 17 sales for $6.5 million. For that same time period in 2020, the club had 33 sales for 11.4 million. “What's even more astonishing is that our projected sales for 2021 is already $10 million, and we are only in the first month of the year,” quips Millsap. “We expect for 2021 to outpace 2020 by considerable margins.” Presently, Mariner Sands only has 13 homes for sale in the community.
Mary Ellen Gardner, who specializes in Ocean Walk in Jupiter, Florida, agrees with Millsap’s predictions. “In 2019, there were only eight sales in Ocean Walk, and the average sold price was $824,375 with a market time of 42 days. By comparison, in 2020, when many people assumed the real estate industry would slow with the rest of the economy, 15 homes were sold in Ocean Walk for an average price of $945,343. Interestingly, in the last six months, Ocean Walk had seven sales with an average price of $1,059,214 and market time of only 17 days.” Echoing Millsap, Gardner concludes that sales will continue to flourish in 2021 across South Florida and South Carolina.
Decrease in inventory
For the first time since the market crash in 2005, the decrease in available inventory factors into real estate decisions and values. Many new construction developments had to halt during the pandemic. From flooring to furniture, many products are still on backorder, causing construction delays. Similarly, services are limited as workers battle the virus or exposure to the virus. “If a worker tests positive for Covid-19, then the entire crew he was with has to quarantine for a specified time. This causes a chain of delays from the construction standpoint,” explains Todd Vance, who works with many general contractors in both Florida and South Carolina.
“Currently, there is no inventory in Ocean Walk,” says Gardner. “The last two that came on the market went under contract very quickly. In fact, I have a number of anxious buyers waiting for a home to come on the market in this community.” Many industry experts expect a gentrification to occur as older residents decide to downsize and more young families relocate from the Northeast or West Coast.
New communities in Palm Beach County such as Alton and Avenir will eventually create more inventory. In Charleston, developments such as Daniel Island, Point Hope, and Carolina Park continue to construct Colonial-style homes for sale. As the inventory increases, the home prices may steady; however, this balance is still years away. “Truthfully, in Charleston and Palm Beach, two hot spots for real estate, I am not sure the supply will ever satisfy the demand,” opines Vance.
Increase in home values
Given these predictions, many families may consider selling their home to take advantage of a hot market. “If a family has toyed with the idea of selling their home, now is the time to do it,” advises Vance. “Many families with young children will look to relocate once the school year ends, so we anticipate another surge in home sales.” From an economic angle, the supply and demand chain creates higher home values. Gardner points out that Ocean Walk sellers typically transact their home for 96% of the list price. In more recent months, contracts are ratified at asking price, or even above asking price.
Though the scale tips in favor of a seller’s market, buyers who are relocating from colder, crowded states still reap the benefit of an expansive estate that costs less by comparison to homes in the northeast. Additionally, buyers are not solely purchasing a home; they are investing in a lifestyle. Coastal communities in Florida and South Carolina boast beautiful beaches, farm to table restaurants, ample recreational opportunities, safe neighborhoods, and southern hospitality. Of course, the low tax rate and tropical climate are bonuses as well.
If you are considering whether to buy a new home or sell your existing one, contact a NV Realty area specialist for a complete market analysis and home valuation.