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1 in 4 homes is selling above the asking price: Here's what you need to know to buy in 2021

A record percentage of homes sold above asking price, and median home price rose 17% in 2020.

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The pandemic's red-hot housing market shows no sign of cooling anytime soon, according to new data from Zillow: More than a quarter of homes on the U.S. market sold above asking price in November, a record high. In November 2019, only 13% of homes commanded prices higher than their initial listings.

Demand for homes typically drops during the fall and winter in the U.S., and prices usually follow suit. In response to the pandemic, though, the market has bucked that trend.

The median home price in the U.S. rose more than 17% between January and November 2020, the same data from Zillow shows.

"Usually, we see the percentage of homes that sell for above the asking price peak in July, which corresponds with the typical sort of homebuying calendar," Chris Glynn, an economist at Zillow, told Grow recently.

This year, however, prices kept rising well past July, Glynn said, "and the share of homes that sold above list continued to increase throughout August and September."

The seller's market in real estate continues

Realtors and economists say two factors are driving the seller's market in the pandemic: high demand from people looking to buy, and a lack of inventory on the market from sellers who were scared to sell their homes during the pandemic.

Indeed, when Zillow asked potential home sellers last year why they weren't putting their properties on the market, "about a third of them listed uncertainties surrounding a pandemic as one of the primary reasons why they weren't selling their home," Glynn said.

But that's not true in every market. While some cities in the U.S. have seen precipitous declines in the number of residential properties on the market, there were more home sales in November 2020 than there were the year before: Sales of existing properties were up 25%, according to the National Association of Realtors. Sales of newly constructed homes rose more than 20%, according to the Census Bureau.

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The hot homebuying market is likely to continue well into 2021, real estate experts say, driven mostly by strong consumer demand and continued low interest rates.

"You can't put houses on the market fast enough," Joel Carson, a real estate agent in Salt Lake City, told Grow in November. "Everything that comes on the market is getting snatched up."

How to buy a home in a hot housing market

That ultracompetitive market means house hunters who want to buy this year should plan ahead as much as possible. Decide how much you should save per paycheck to afford your target home, calculate how much you can afford (understanding that there are lots of hidden costs to account for beyond the mortgage payment), and get preapproved for a loan.

Doing that pre-work can help give you a firm foundation. If you do find yourself competing for a home, it will be easier to keep a level head and make a decision that makes sense for you.

In their hurry, a lot of buyers are skipping key steps, experts say. Almost 20% of winning home bids in June waived inspection contingencies, up from 13% a year earlier, according to data from Redfin. As tempting as it might be to eliminate contingencies and look appealing to sellers, buyers should tread carefully, says Sue Riley, a real estate agent in Northern New Jersey.

"You never want to forgo an inspection. Ever," Riley says. "There's a lot of hidden things that can come up, and you don't want to be on the losing end of that."

Michael and Jack Perry, a father-and-son real estate team in Salt Lake City, say that buyers should mentally prepare themselves to play a long game but at the same time be ready to act quickly: In their market, most homes sell in a matter of days.

"It's even hotter than the data appears," Michael Perry says. "It's a 24- to 72-hour market."

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