While likely still heading for a banner year, the hot market for residential real estate won’t be as hot as originally thought—at least according to one analysis—as a shortage of homes on the market and record-high prices constrain sales.
Real estate website Zillow expects 5.91 million homes will be sold in 2021, according to a forecast released Monday. That would be a 4.8% increase from 2020, a notable jump considering last year was the strongest year for existing home sales since 2006.
But this latest estimate continues a pessimistic turn for Zillow’s forecasts. In March, Zillow had forecast more than 6.6 million existing homes to sell this year, a 17.2% increase over 2020 levels but below its February projection of 7 million.
Plenty of people still want to buy, but soaring prices and a shortage of sellers have cooled the market. The number of available homes for sale is at a near-record low, and the limited inventory has caused buyers to resort to extraordinary measures, such as waiving the home inspection, making all-cash offers, or bidding above list price.
Some buyers are reluctant to go that far. Sales have dropped from their peak at the start of the year, and mortgage applications are down.
Low interest rates for mortgages and the desire for more space to work from home during the pandemic sparked a manic real estate market that has seen home prices shoot to record highs. The median sale price rose to a record $341,600 in April, with those houses selling quickly, spending an average of just 17 days on the market.