Real estate has been all over the news the last couple of months. Due to the pandemic, people spent more time than ever in their homes over the last year. They've had to adapt to working from home and physical distance to work became less important. Many people are wanting more space and privacy. Combine that with super low interest rates, and there is huge demand for housing right now. The Covid policy of mortgage forbearance caused even less homes to hit the market than normal. Mortgage forbearance means payments are temporarily suspended for anyone who cannot pay their mortgage with no threat of foreclosure. We've already been facing inventory issues the last few years, so these factors have only exacerbated our problem.
The greater Grand Rapids area hit historically low inventory levels the last four months straight. Refer to the chart below to see the changes in inventory levels over the last seven years. Inventory is a measure of whether the market is a buyer or seller's market. This number is determined by figuring how long it would take to sell through the current number of homes on the market at the current rate they are selling, assuming no new houses hit the market. 5-6 months of inventory is considered a balanced market. In March and April this year, we only had 0.5 months of housing inventory, an extreme sellers market.
The number of listings hitting the market is actually up 7.3% this year. However, there are so many more buyers relative to that, the overall inventory level is lower. The average sale price so far in 2021 is $294,115, up 18.1% already over the 2020 average price. Prices are jumping up very quickly, especially in lower price ranges. Buyers are regularly waiving inspections, paying 10-15% above list price, and offering to cover large appraisal gaps to win bidding wars. Homes in the $250k or less range are regularly getting 10-30 offers. Homes that would be difficult to sell in other markets still sell quickly. I'm talking weird layouts, questionable foundations, busy streets, and bad smells. This market is extremely difficult for buyers, but it is great to be a seller right now.
So how does Grand Rapids fare comparing to other markets around the country? Is it the inventory this low everywhere? Referencing 25 Hottest Real Estate Markets for 2021, I looked for statistics from these specific local Realtor associations. Not every location had the data I was looking for, but here are some locations I was able to find relative monthly inventory levels.
I was not able to find anywhere with lower inventory levels than our area. Boise, Denver, Salt Lake City, and Central Ohio are close to the same level as Grand Rapids. Grand Rapids is right up there with the tightest markets in the country. With mortgage forbearance ending soon, this should inject a little needed inventory into the market. Interest rates are also expected to rise which will help soften demand. These two factors should cause the supply to increase modestly and escalating prices should level out to slower and steady growth by 2022.
Great info on everything real estate.