Fueled by a combination of historically low interest rates, pent-up pandemic savings, and probably a little “monkey-see-monkey-do,” the US housing market is red hot.
And if history is any indicator, it’s about to get much hotter. According to Redfin, a national real estate brokerage, June was the top month for home sales in six of the last nine years. In the three years it wasn’t June, it was July twice and May once.
Not only is summer the prime home-selling season, 2021 is proving to be a prime home-selling year. In each of the first four months this year, more homes have sold than in the same month in the last 10 years.
For example, the 433,679 homes sold in January 2021 is more than any other January dating back to 2012 — as far as the Redfin data goes. The same is true for February, March and April.
And it’s not even close. Home sales grew 14.08% year-over-year from Jan. 2020 to Jan. 2021 — an additional 53,542 sales.
So what does this mean for the coming summer?
Calculating a growth rate
To create a summer 2021 projection, we first calculated a year-over-year growth rate for home sales. We compared January, February, and March 2020 with the same months in 2021.
For April, we compared 2019 data with 2021, due to skewed data for that month in 2020.
We then applied that average growth to the coming summer months to get an idea of what summer 2021 homes sales might look like.
|2019||2020||2021||Year over year|
The average of the first quarter growth rates is 11.59% — which is staggering considering year-over-year growth has rarely reached double figures in the last 10 years. Many of those instances were in 2020 as a result of the pandemic.
So what happens if we hold this pattern of 11.59% year-over-year growth throughout the busiest season of the busiest year for home sales?
Again, due to irregular 2020 data, we applied the 11.59% growth rate to 2019 numbers for May, June and July.
2021 summer homes sales projections
If we stay on the current track, we are looking at a doozy of a summer for home sales. July could get dangerously close to 800,000 homes sales, toppling the previous record of 709,463 in July 2020.
Here’s what that looks like, with the bright green line indicating 2021 projections and the others representing actual Redfin data. We threw in 2012 to compare where the housing market was 10 years ago.
Will home sales hit 800k this summer?
If we learned anything in 2020, it’s that the world can change in the blink of an eye. And there’s little chance the year-over-year growth rate will neatly follow the average for Q1. These projections are just a baseline of where the current course could take us.
There are a few things that can — and likely will — alter this trajectory:
- A recovering economy fueling additional growth
- Dwindling inventory unable to keep up with demand
- A sudden rise in interest rates
But even if the psychologically important 800,000 number is not achieved this summer, there’s little chance for anything but an ultra-hot home buying season.
So, do I have any chance of landing a home this summer?
Ok, we’re headed for a record year — what now?
Well, if you’re still saving for a down payment and sorting out your needs, perhaps it’s best to wait until the rush cools down in Autumn.
But, if you are dead set on buying a house while interest rates are low, it might be wise to accelerate your timetable so you’re not facing peak competition in July.