US real estate market set for strong 2021

US real estate market set for strong 2021

January sales figures released by the National Association of Realtors point to a strong 2021 for the US real estate market. Sales reached a new 15-year record and prices jumped by over 14% in the year. The statistics lead analysts to believe that this year will see a busy spring season.

Strong start to sales

The National Association of Realtors (NAR) latest report on the US real estate market shows that sales of property stormed ahead in the first month of the year. January saw the second highest monthly rise since 2006 with year-on-year growth just shy of 20%.

All four major sales regions posted similarly strong increases. The South (including Florida and Texas) recorded the highest annual uptick in sales with a final figure of 25.1%.

Supply continues to plummet

2021 has started following similar trends to 2020. Hand-in-hand with strong sales goes falling inventory. Supply across the US real estate market in January stood at just 1.1 months. This is a decrease of 0.8 month compared to January 2020.

The market had 1.04 million units for sale at the end of the first month. This represents a 25.7% drop on the figures for a year earlier.

There are simply not enough homes for sale,” commented Lawrence Yun, Chief Economist for NAR. He noted that buyers, particularly those entering the market for the first time, are experiencing frustration at the lack of supply.

Low inventory equals buy-to-let opportunities

Plummeting supply levels mean that many buyers will be forced to turn to rentals, especially those seeking for their first homes. This opens up buy-to-let and build-to-rent in the US generally and in highly sought-after areas in particular.

Southwest Florida is a case in point. Like the rest of the Sunshine State, inventory levels are at rock-bottom and single-family homes in very short supply.

Prices still rising

Buyers also face strong price rises in 2021. NAR figures point to a 14.1% year-on-year rise in January taking the median sales price to US$303,900. Yun highlights rising mortgage rates and believes that they are now bottoming out.

In January, the 30-year fixed rate stood at 2.71% compared to 2.68% in December. “Rates will gradually inch higher,” he said. “The absolute low point in mortgage rate is likely to be over.”

Optimism for US real estate market in 2021

All the all, the January figures lead Yun to believe that the market is in for a strong year. He emphasizes that sales activity will be strong in Q1 as real estate leads up to its busiest period of the year in the spring.

Q2 will follow a similar pattern and register strong year-on-year increases given the low activity levels between April and June in 2020. Yun believes that by the end of Q2, sales will be up by 15% on an annual basis.

Everything points to 2021 as an exceptional year for sellers plus continued potential for buy-to-let returns

(Source: NAR)