The value of the average U.S. home in December was 8% higher than the year before, Zillow's data shows. In some of the country's hottest markets, like Phoenix and San Jose, the uptick in home values was almost double the national average.
Home values grew more than 3% in the last quarter of 2020. That may not seem like a lot, but it was the highest quarter-over-quarter jump Zillow has ever documented since the real estate website started collecting data in 1996.
One reason for that upward tick is that a number of market influencers that drove up demand as the pandemic dragged on, like historically low interest rates and remote work, went from being temporary anomalies to durable trends, says Chris Glynn, an economist at Zillow.
"It takes some time for these trends to take hold," Glynn says. "People might have known that work from home was going to be a long-term option starting in summer. But then it takes a few months for company policies to be established and for individual buyers to have the confidence to go out and make big life changes around that. And I think that's one of the reasons that we really saw so much activity in the fourth quarter and so much acceleration throughout the year."
Last year was good for home values across the country, but a handful of markets led the charge with huge gains for property owners, according to Zillow's data: The top 10 metro areas for increases in home values all saw growth of 12% or more.
The turn the housing market took in 2020 caught a lot of people by surprise, Glynn says, but market watchers are expecting the market to get even hotter this year.
"We do expect that 2021 will be another really strong year for housing, both in terms of sales and in terms of home value appreciation," Glynn says. "Our forecast for 2021 is an additional 10.3% growth for home values at the national level."
So, if you were thinking that 2021 would be the year you'd buy your dream home, you'll need to be prepared for a competitive search where listed properties sell quickly and, often, for well above asking price.
While the fundamentals of homebuying, like having good credit and a solid down payment, continue to be key in this ultracompetitive market, there are a few tricks that can help your bid float to the top of the pile, real estate professionals tell Grow.
- Get a preapproval letter from your lender. Before you even start looking at houses in a competitive market, get a preapproval letter from your lender that you can whip out if you want to move on a property, said Debra Hall, a real estate agent in Northern Virginia. "A preapproval letter is when you have reached out to a lender," Hall said. "They've checked your credit. They've verified your employment. They've looked at your bank accounts, and they deem you truly qualified to buy a house." Putting that effort upfront can save you valuable time and put you in front of other offers.
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- Don't forgo the home inspection. The tight housing market has driven some anxious buyers to skip home inspections in order to seal the deal, but that's a very risky move, said Sue Riley, a real estate agent in Northern New Jersey. "You never want to forgo an inspection. Ever," Riley said. "There's a lot of hidden things that can come up, and you don't want to be on the losing end of that."
- Write a note. When you write a personalized note introducing yourself to a seller, it creates an emotional connection between the two parties, said Leigh Marcus, a real estate agent in Chicago. "When a buyer writes the letter — the kind where the sellers can see who they were when they were buying — that resonates a lot with them," Marcus said, and taking that extra step can put you ahead of your competition.
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