The housing market has experienced immense growth since the beginning of the COVID pandemic in spring 2020. According to Redfin, the median sales price for the average American home grew by 24.8% from June 2020 to June 2021! In a recent survey of real estate professionals, 78% of agents reported that values are still climbing in their local markets.
And this housing boom has led to job growth in the real estate industry. 90% of real estate agents surveyed agree that now is a good time to start a career in real estate!
It’s strange now to remember that many real estate experts in April 2020 were expecting the market to slow down as uncertainty took hold of buyers and sellers at the onset of the pandemic. So why did the housing market explode despite concerns about the virus and the subsequent recession? And what does this rapid growth mean for real estate agents and professionals who plan to join the real estate industry in the near future?
Why the Housing Market Boomed When We Expected a Bust
Economists hate uncertainty. Uncertainty typically makes buyers and sellers more cautious. And when the COVID outbreak hit the U.S. in the spring of 2020, uncertainty was everywhere. How many people would catch the virus? Would closing the economy cripple the housing market? Do we have enough toilet paper to survive the apocalypse?
Then there was the fact that real estate was considered “non-essential” for a period of lockdown in some states, bringing all face-to-face business to a standstill. How did the housing market thrive under these conditions?
High Buyer Demand
Buyers flocked to buy homes during the pandemic because of several driving factors:
Low interest rates. The Fed lowered interest rates to encourage buyers to get home loans. Lower interest rates increase buying power, which means buyers have the unique opportunity to spend less on interest payments and more on their new home.
Remote work opportunities. As office jobs went virtual, people no longer needed to live near their workplaces. This prompted people to relocate to more affordable areas outside of cities where they could afford to buy instead of rent.
Need for more space. With the extended lockdown, people living in small homes and apartments found themselves desperate for more space. Coupled with the new found remote work potential, this increased buyer interest in suburbs and even rural areas.
Middle-to-high income workers were less likely to be financially impacted by the pandemic, so they retained the means to buy. Sadly, those hardest hit financially by the pandemic were low-income workers who were unlikely to be in the market for a home. So the pool of qualified buyers did not decrease by much (if at all).
Low Seller Supply
While buyers have been clambering for homes, there simply haven’t been enough homes available to meet the buyer demand. 65% of agents surveyed say that their local market currently has an inadequate supply to meet demand.
Here’s why supply has been low:
Fear of contagion. Sellers were slow to list their homes on the market because they didn’t want people touring through their homes, potentially exposing them to the virus.
Slow construction. New home construction has been slower than normal since the housing market collapse of 2008. And it’s been difficult for builders to catch up because of the increase in scarce building materials since so many homeowners took advantage of the lockdown to tackle home renovation projects.
Limited land area. Some markets have limited land available on which to build new homes.
Aging at home. Many older homeowners are choosing to remain in their homes rather than move to retirement homes or move in with family members.
Sellers trying to time the market. Some sellers are watching values rise month after month and are waiting to list when they think values have peaked.
The end result of this high demand and low supply? Price increases!
While price increases may be a bad thing for buyers, they’re a great thing for sellers. And they’re also a good thing for real estate agents who earn a percentage of the sales price as commission.
How Real Estate Agents Have Fared During the Housing Market Boom
On the whole, real estate agents have experienced impressive job growth as a result of the housing market boom.
Since agents are paid on commission, the greater their sales volume, the more income they earn. And with agents estimating an average expected increase of $1,161,600 in year-over-year sales revenue, it’s a good time to be a real estate agent!
Survey data shows that 7 in 10 real estate agents are working more today than they were pre-pandemic because of the hot market conditions. And, for many agents, these increased hours are paying off in additional income. 70% of agents surveyed estimate that they will make at least as much money in 2021 as in 2020, with 39% of agents expecting to make more money this year than last year.
What This Rapid Growth Means for Aspiring Real Estate Agents
This impressive real estate market growth means there are lots of buyers in the market, looking for a real estate agent to help them with their purchase. The downside is that new agents will face heavy competition from other agents.
But on the whole, prospects are good for aspiring real estate agents. 94% of agents surveyed agree that new agents can have success in today’s market with the right education and support. And with top-quality online real estate courses and additional training courses to help agents learn how to generate leads and build their business, today’s new agents can set themselves up for success.
If you’re looking for a flexible career with unlimited income potential and the power to be your own boss, real estate might be the perfect fit for you. Enroll in your pre-license course to start your new adventure as a real estate professional.