A broad range of buyers have been able to land homes at more affordable monthly costs than ever before, but as competition heats up this year, only the strongest will be able to close sales.

It’s tough not to go through some period of reflection after a series of industry-changing events. Last year’s market showed us more than we could ever imagine, and it will have long-lasting effects. We have never gone through anything like it, and there does not seem to be an end in sight. After some thought, I can’t help but wonder if it also strengthened homeownership in the Pioneer Valley. 

Just looking back at the 2020 real estate market can be exhausting. Even if half of what we experienced went on, we’d still be talking about how crazy it was. Multiple–offer situations were commonplace, lots of homes sold far above asking price, inventory was pretty much non-existent and days on the market turned into hours.  

Most buyers went through the stress of striking out multiple times before finally getting an accepted offer or giving up. Sellers had to deal with the risks of allowing tens of people into their personal space during a time where distancing and cleanliness were key, while many times were having trouble securing a place to go themselves. A home to sell was just more baggage in a bidding war. 

A New Crash? Not Likely

Seeing all of these quick decisions and rising prices, many can’t help but think we’re heading towards another crash.  

The Pioneer Valley struggled its way to recovery after the Great Recession, so the fear is understandable. Springfield and some surrounding areas were hit so hard with foreclosures and short sales that homes there were years behind other parts of the state in recovering their values. The downside of variable–rate mortgages and a low bar to qualify showed itself to us all, and entire neighborhoods fell victim to abandoned homes and an inability to escape from a mortgage payment that continued to rise regardless of those homes’ value. 

This market is different, though. Demand was already high before 2020. Many areas were dealing with a one to three months’ supply of inventory. Last year seemed to add gasoline to the fire and less than a month was no longer rare in some cities and towns. 

This has changed the way people buy houses, and I do not see how we can go back. With so much competition, sellers are in a huge position of power. They can get away with doing less and still get offers from the most attractive buyers. Ones who put more money down, have fewer contingencies, ask for no closing cost credits and in some cases offer to pay above appraisal value.  

Higher Prices, Lower Carrying Costs 

In an area where asking the seller to pay for closing costs was common, the entrance fee to buying a home has now gone up. Before 2020, most buyers just saved enough for a down payment. That is no longer a viable option if you want a good chance at getting an accepted offer these days.   

This means the current buyers that are winning these homes have more savings and are better qualified than in years past. These same well-qualified buyers are experiencing record low interest rates, and in many cases, their payments are more affordable than what they would have been pre-2020. Some have even been able to go with a 15-year mortgage they would never have considered at a higher rate. It is a window of opportunity where prices are higher, but mortgage costs are lower.     

Current homeowners were able to take advantage of the market as well. Many of those who already had a mortgage were eligible to refinance to a much lower rate, pay off additional debt and still have a lower payment. These owners are in a better financial position than they were before. This alone may be one of the greatest things to happen to someone who purchased a home before 2020 and highlights some of the benefits of long-term ownership.       

Highly qualified homeowners and more affordable mortgage payments have been filling our neighborhoods lately. This means less chance of falling behind and more opportunities for wealth gain. These are the things that stabilize homeownership and strengthen neighborhoods.  

Nobody has a crystal ball, and with all the chaos in the market, it’s hard to predict the future. We’re still dealing with record-low supply, and unless we see a massive increase in the number of homes on the market or a huge drop in demand, the competition will continue, and only the strongest buyers will close.        

Elias Acuna is a broker associate at Springfield-based Maria Acuna Real Estate and the 2021 president of the Realtor Association of the Pioneer Valley.