Closings are Down but Prices are Up

In recent months, the real estate market has seen a decline in the number of closings while also experiencing an increase in home prices. While this may seem contradictory, there are several factors at play that have contributed to this trend.

Buyers

For buyers, the current market presents a challenging landscape. With home prices on the rise and inventory levels low, competition for available properties is fierce. This has caused many buyers to be priced out of the market or to struggle to find homes that meet their needs and budget.

Additionally, the pandemic has led to a shift in priorities for many buyers. With remote work becoming more common, some are seeking larger homes or properties with more outdoor space. This has further strained the already tight inventory levels, leading to fewer closings.

Sellers

On the other hand, sellers have been benefiting from the current market conditions. With high demand and low inventory, many homes are selling quickly and for top dollar. This has made it an ideal time for those looking to sell their properties and move on to their next chapter.

However, even with the favorable conditions, some sellers are still hesitant to list their homes due to concerns about the pandemic or uncertainty about the future. This has further contributed to the low inventory levels and, therefore, fewer closings.

Market Update

So, just how much have closings decreased? According to a recent report from the National Association of Realtors, sales of existing homes fell by 6.6% in February 2021 compared to the previous month. This marks the second consecutive month of declining sales.

At the same time, home prices have continued to rise. In February, the median existing-home price was $313,000, up 15.8% from the same time last year. This is largely due to the low inventory levels and high demand mentioned earlier.

What Does the Future Hold?

While there is no crystal ball to predict exactly what will happen in the real estate market, there are some factors that could impact the future of closings and home prices.

First, as more people become vaccinated and the pandemic hopefully begins to subside, there may be an influx of buyers and sellers who were previously hesitant to enter the market. This could lead to a surge in inventory and more closings.

Additionally, the current ultra-low interest rates have made buying a home more affordable for many buyers. However, if interest rates were to rise significantly, this could cause some buyers to hold off on purchasing a home, leading to fewer closings.

Finally, there is the issue of affordability. While home prices have been rising, wages have largely remained stagnant. This means that many potential buyers may not be able to afford the homes that are currently on the market. If this trend continues, it could lead to a decrease in demand and, therefore, fewer closings.

Conclusion

In conclusion, the current real estate market is a mixed bag for buyers and sellers. While low inventory levels and high demand have driven up home prices and benefited sellers, it has also made it more difficult for many buyers to enter the market. This has led to a decrease in closings, which is a trend that may continue in the short term.

However, there are several factors at play that could impact the future of the market. As the pandemic subsides and interest rates fluctuate, we may see changes in inventory levels and demand that could lead to an increase in closings.

If you are considering buying or selling a home in the current market, it is important to work with a qualified real estate professional who can help you navigate these unprecedented times.