BY JESS GARRISON · PURCHASING A HOME
This is an opinion piece from a Real Estate professional.
2020 started with a huge buzz. The real estate market was looking to continue a steady, year over year increase. Interest rates were slowly climbing, but were still at relatively advantageous levels . New construction seemed to be popping up everywhere. Generally speaking, buyers and sellers seemed poised to remain active in the market.
In one fell swoop, and coming out of left field for many people, our nation was overrun with a horrible virus that brought just about every industry to a screeching halt seemingly overnight. In an effort to slow the spread of this virus, our governor here in Michigan shut down many businesses, including Real Estate. We were still allowed to close on properties, but we couldn’t show homes to potential buyers. Without being able to show homes, and with many people fearing for their financial livelihoods, the real estate market essentially was nonexistent for two whole months. I remember those 2 months all too well. They were filled with overwhelming fear on so many different levels. As Realtors, we are all self-employed, so I wasn’t worried about losing my job. But if people aren’t buying and selling homes, then I might as well be unemployed. The fear of the unknown can be one of the most crippling. Here in Michigan, the beginning of May came with our governor opening up many parts of the economy to begin working again, and this included real estate. What happened next was a phenomenon I don’t think anyone saw coming!
Like a finely tuned, high performance sports car, the real estate market started firing on all cylinders. In Michigan, the spring market is our most productive time of year regardless, but this spring, the housing market resurgence hit with a vengeance. In a normal spring, markets start churning in March (right when the our lockdown began) and slowly pick up speed over the following weeks. By the time May hits, we are in the heart of our busy season. In 2020 we didn’t get any of that build up to May. When the economy opened up, the pent-up demand had reached a fever pitch, and you could see it everywhere. As homes hit the market, multiple offers began coming in on what felt like every property, and prices were driven up and up.
I think many different factors were at play here. Families with young kids that were still living in their first 3 bedroom, 1 bath home that they had purchased (for an amazing price) before having kids suddenly realized that they had been living on top of each other for months. It became evidently clear that it was time for them to upgrade to a larger, family style home with multiple living spaces, more bedrooms, and more bathrooms. There was also a mass exodus from city living. Here in West Michigan, folks from Chicago, Grand Rapids, and other large cities began purchasing second homes at a clip never before seen. Living in a large city, stacked on top of one another for months, and forced to remain inside a few hundred sq. ft. condo was enough to make anyone want more living space to move around. Here in West Michigan, we had plenty of properties like that to offer. In addition to all of this, interest rates began to fall steadily. People who were on the fence about moving long before COVID-19 hit looked at this as an opportunity to finally make the move. In West Michigan, there are multiple fast and slow selling seasons in the real estate market. In 2020, the market never slowed down once the flood gates opened in May.
As 2020 drew to a close, the Coronavirus ravaged Michigan with a second large spike of new cases and hospitalizations. Although real estate wasn’t shut down this time, it was very obvious that people had recoiled again. The Holidays typically see a very slow number of sales regardless, so I am hesitant to read too much into that.
As we look forward to 2021, there is both much hesitation and excitement. We will see a changing of the guard in the White House. Depending on who you talk to, this is seen as either a good thing or a bad thing. I personally feel that a new president is going to have little or no impact on the 2021 real estate market. Looking further into the future, that could be another story, but any change won’t be felt or seen until we find out what new legislation, tax reforms, and the like are enacted. Interest rates appear to be staying low for the foreseeable future. This will definitely keep buyers excited about cashing in while they can. With multiple vaccines for COVID-19 being implemented at the end of 2020 and ramping up throughout 2021, many consumers hope that there is light at the end of the tunnel. This could also correlate to buyers and sellers feeling comfortable once more about making a move in 2021. New construction appears to be plowing ahead, but the cost of materials has skyrocketed over the last year. Many hope that as businesses reopen and people return to work in a more normal fashion in 2021, the cost of construction materials will begin to decline and that those materials will become more readily available.
I personally look at 2021 with cautious optimism. I’m setting lofty sales goals, but if 2020 has taught us anything, it’s that the real estate markets can surprise us and that literally anything can happen!