2021 has been a crazy year in real estate. From cataclysmic events like the precipitous fall of Zillow Offers to the rise in consolidation and acquisitions in the tech sphere, there’s been a ton to keep track of. To top it all off, a numerous records have been broken, some in spectacular fashion, as the market keeps pace with a rapidly changing world.
A new report from Redfin, highlights several of the real estate records that were set in COVID. Many of these represent continuations of trends set in the equally unusual year of 2020.
For instance, median sales price reached an all time high this year in June, 2021. Peaking at $386,000, this was up a massive 24% from the previous year. Rising prices are closely connected to two other metrics that reached historic lows this year: inventory of homes for sale and interest rates.
Inventory has been declining steadily for the last decade or so, due to a lack of building, but it reached a record low of 1.38 million homes on the market in June of this year. At the same time, interest rates were significantly decrease as a form of economic relief during the COVID pandemic. This meant that mortgages became more affordable than at any previous time, with the interest rate on a 30-year fixed rate mortgage bottoming out at 2.65%.
These factors are all closely connected. It’s a narrative that has dominated much of the discussion about national residential real estate this last year.
Another factor, that has received less comment but still had a huge impact on real estate, is the K-shaped nature of the recovery. While the job market is still struggling to return to pre-pandemic levels, many high income household have done very well with the shift to remote work and the increased leveraging of digital technology.
For instance, according to Redfin’s index of demand for second homes, the desire for vacation homes has nearly double since the onset of the pandemic. Compared to the pre-pandemic baseline of 100 in January-February, 2020, this index peaked at 191.4 in 2021. Simultaneously, the median price of luxury homes has grown at noticeably quicker rate than the rest of the market. In the second quarter of 2021, median luxury home prices were up 25.8%.
In light of this—and all the other craziness of the last few years—its clear that 2020 was not just a momentary blip. Major change is here to stay. You should ask yourself, what are you to identify and adjust to these changes? How are you going to adapt in 2022?