Last year, the real estate market was off the charts. Sellers had lines of buyers, all ready to spout offers well above asking prices. Buyers were desperately trying to get any home that hit their minimum requirements. This report from the National Association of Realtors, details exactly what happened in 2021 and what we can learn from both the buyers and sellers when making our next move into real estate.
Who’s Buying The Most Homes
As of last year, it seems the millennials were taking up most of the buyer’s market share. This is important for sellers to know because if you’re trying to sell your home, it’s best to know who your buyers are and what they value. According to this chart from the National Association of Realtors, Millennials make up to 37% of the total buyer’s market in America. Here’s what sellers might want to know about what kind of homes their millennial buyers are looking for.
Millennials were more likely, than other buyers, to purchase in urban areas. This is because convenience to their job and commuting costs were both more important to this group. This is especially important to sellers because we now know what key attributes you can market when putting up your home for sale. You have leverage if your home is near a business district, near a popular freeway such as the 101 or 405, or near your buyer’s workplace. Take the time to learn about your buyer’s commute and see if you can leverage that into your pricing.
Who Is Selling?
Baby Boomers make up the largest share of sellers at 43%. Why? Because they are downsizing. Baby Boomers don’t want gigantic homes that have one too many bathrooms and a big yard that needs constant maintenance. This group is selling to move closer to friends and family, due to retirement, or because their home is too large. This is something for buyers to keep an eye on. What buyers’ can leverage are the expenses of maintaining a home. My advice would be, as you are scoping out a home you are willing to buy, keep an eye out for things that the Baby Boomer generation would have a hard time maintaining – especially if it is costly, such as a big back yard, front yard, pool, tree trimming and etc. Ask the seller’s agent what the maintenance expenses on the property look like and if you have room to negotiate you can make a reference to that.
What Are The Primary Reasons Why People Are People Bought Homes In 2021?
Looking at the chart here, it makes sense; most of the buyers’ market is made up of Millennials. The 3 primary reasons most people are buying homes are: the desire to own a home, desire for a larger home, desire to be closer to family, friends, relatives. Interestingly, a change in family situation was a close contestant. Big changes like marriage, an addition of a child, or divorce were motivating factors. So what can buyers and sellers take from this? We know a big majority of millennials are desperate to move out from their parents’ homes. We also know that Millennials are having children and therefore looking for a bigger home to house their family size. What’s interesting, is the fact that important, logical factors like better area, affordability, closeness to job are not main compelling reasons why buyers have lined up to buy homes across the nation. It’s the emotional side of things that represent independence, capability, and size. So when sellers are speaking to buyers, it’s better to pull on emotional ties connected to these factors rather than the logical factors. For example, a typical American buyer isn’t going to buy your home because your home is a better investment 10 years down the line. A typical buyer is going to buy your home because they can make it their own, the kitchen is spacious and you have an extra bedroom for the kid they plan on having in 2 years.
What types of homes did most people buy in 2021?
More often than not, if you had friends buying homes in 2021, you’ll find that many of those friends probably bought previously owned homes. Matter of fact, 80 – 90% of people bought previously owned homes. This means 3 things (among many others):
1. There was a shortage of lumber that constricted the process of building new homes.
2. This shortage (along with other factors) caused buyers to rush to the markets in fear that home prices would continue to skyrocket and they wanted to secure the best deal they could before prices shot up any further.
3. Sellers leveraged the buyer’s fear of missing out and sold their homes at higher than market average prices.
How Much Did People Pay For Their Homes?
So the real question is, exactly how aligned were the purchase prices in comparison to the asking prices? Last year, you could expect the purchase prices to be identical to the asking price. In other words, if the seller was asking for $1 million dollars for their 3 bedroom, 2 bathroom home with a small patio in a subpar neighboorhood, buyers were stuck paying the $1 million dollars. There wasn’t much room to negotiate in this market. As many of you may know, in California – especially southern California, buyers were paying well above asking price just to outcompete other offers.
What Most Buyers Were Willing To Compromise To Get Their Home
Easily some of the most important factors were compromised and negotiated away during last year’s real estate market. Most people ended up changing their stances on the price of the home, the condition of the home, and the size of the home. This shows that sellers really had the ball in their court last year because they were able to get buyers to pay more for a home that wasn’t as big or as well maintained.
Given these trends, we can get a good understanding of what we can expect this year as well. It may not be as saturated as last year’s market, but we can expect to see similar trends appear this year.