Home prices ascended to a record high in March, and homes were sold more quickly than ever.
Prices keep on rising
The median price paid for an existing home was $329,100 in March, according to the National Association of Realtors. That marked a 17.2% increase over March 2020. It was the fastest year-over-year price increase on record, the NAR said.
Year-over-year prices have gone up for 109 months in a row. The median home price has climbed $100,000 in a little over four years: In January 2017, it was $228,700.
Low inventory spurs competition
Prices have rocketed at double-digit percentages for eight months in a row, fueled by a diminishing inventory of homes for sale. Just 1.07 million homes were listed for sale at the end of March. In March 2019, before the pandemic, 1.67 million homes were for sale.
The combination of low inventory and rising prices has whipped up competition among buyers. Multiple offers are common, and houses go fast. In March, the typical home sale was made in 18 days, a record low.
What it means for buyers and sellers
With homes selling so quickly, and with rampant bidding wars, this is the strongest seller's market in a long time. It's an easy time to sell a home. Sellers don't even have to fix up their properties; they'll find willing buyers anyway.
Buyers don't have it so easy. It's commonplace to make offers on multiple homes, only to lose out to competing bidders. Offering the highest price is a dependable tactic. It's also helpful to make the seller's life as uncomplicated as possible by including few contingencies in the offer.
Most purchase contracts are contingent on the buyer securing a mortgage. Cash buyers don't need that contingency, which makes their offers attractive.
Many buyers are already homeowners who are looking to upgrade, downsize or relocate. These buyers are better off by not making the purchase of their next home contingent on the sale of their current home.
Some buyers are tempted to drop the inspection contingency, which gives them the option to back out of the deal if a home inspection uncovers previously undetected problems. Instead of waiving an inspection, it can be better to set a high dollar limit on the work that needs to be done. The purchase would proceed if the necessary work falls under the dollar limit.
Eventually, higher prices will persuade homeowners to list their homes for sale. It's anyone's guess when that will happen. Until then, it will remain a strong seller's market.
Media: If quoting from this Commentary, the source is Holden Lewis, NerdWallet mortgages expert.