2020 was a difficult year and it felt like we were never going to see the light at the end of the tunnel. From toilet paper to antibacterial soap, everything seemed to be running out of stock and although things are a little better in 2021, there are some areas where stock remains low. One of the most concerning areas is real estate.
It's true that the real estate market has weathered the tumult that was 2020, inventory is on the decline. HomeLight's 2021 agent survey reveals that much of the country is experiencing a strong seller's market, but sellers are still hesitant to put their homes up for sale. If this continues for much longer, realtors worry about the lasting effects it could have going forward.
Kensington Courts, a 155-unit residential development in Philadelphia, being built by the Riverwards Group in 2020-2021. With building materials, finishes, fixtures, and appliances supplied by Mega Supply Pro.
Is there any way to alleviate the market? Agents say yes, and they believe the following factors could make the market more balanced:
Vaccines
The COVID-19 vaccine is quickly being distributed throughout the country and 50% of agents believe that as more become vaccinated, buyer and seller activity will pick up. Even though 53.6% of surveyed realtors revealed that although would-be sellers are hesitant to list their homes now, they are planning to do so in the near future, thus adding more houses to the local inventory.
Secondary or Vacation Homes
Many employers who had to close their offices due to the pandemic have allowed employees who could work remotely to do so. If remote work becomes a permanent practice even after the pandemic is over, it's highly likely that people would consider relocation.
More interestingly is that 49% of agents believe that remote work could encourage homeowners with more than one property (be it a secondary home or a vacation home) to choose which home they'd like to live in fulltime and put the other property up for sale. This would help alleviate the dwindling market, but it would also be a huge boon for those sellers since they don't have to worry about finding another home.
Tax Incentives
One of the hardest things first-time buyers experience when trying to buy a home is coming up with a down payment. That may not be as much of a problem now that President Biden proposed a $15,000 first time buyer advanceable tax credit. What this means is that the first-time buyer could access that $15,000 now for a down payment instead of waiting until tax time to claim it.
On the other hand, this could be problematic if a lot of first-time buyers took advantage of the credit. One way around this is to incentivize would-be sellers with their own tax credit. This tax credit could target sellers who would receive a profit between $250k and $500k and it would waive the capital gains tax fee. This wouldn't be a permanent solution, as it would only be for a limited time. This is just an idea and there's no rumblings on Capitol Hill regarding anything like this.
Housing Shortage Won't Last Forever
It's a tough market out there if you're hoping to buy and sell at the same time. You may be able to make a lot of money when selling, but housing is in short supply and house prices are steadily increasing. No one can say for sure when the market will balance out, but you have to remember that this will not last forever. The real estate market is inherently cyclical, and follows a model comprising of four main phases: recovery, expansion, hyper supply, and recession. This implies that historically, there has never been a sustained expansion or hyper supply period without an eventual recession, followed by recovery.
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