2021 Real Estate Market Predictions

 

2020 was quite a year, to say the least. Many real estate professionals predicted that the real estate market would be strong. Then, the coronavirus pandemic and stay-at-home orders hit. The market was a little shaky in the spring. When the country started to open up again in the summer, the real estate market took off. There were many factors that were affecting the market. Interest rates were at historical lows, the inventory of homes for sale was low and there were many buyers on the market. This low supply and high demand made prices increase. According to an article on Realtor.com, prices increased 0.6% in December. Many people are wondering what the 2021 real estate market will be like.

 

2021 Winter Market

 

According to Lawrence Yun, the Chief Economist at the National Association of Realtors, the 2021 winter market will be record-breaking and will make history. Typically the months of December, January, and February are a bit slower, and the spring real estate market starts in March. This is a great start for the entire 2021 real estate market.

 

  • Interest Rates
    Interest rates are still at historic lows. For example, in January a buyer could get an interest rate of approximately 2.75% on a 30-year fixed, conventional mortgage. Real estate and mortgage professionals are wondering how long these low rates will last. According to Freddie Mac, Fannie May, and the Mortgage Bankers Association, the rate is expected to hover just over 3% for the rest of the year, even though rates were under 3% in January.

 

  • Housing Starts
    There are no signs of housing starts slowing down. According to Kiplinger.com, total housing starts are 2.8% higher than a year ago. New construction home prices are going up because of demand and other factors.

 

  • Lumber Prices
    Lumber prices are one of the factors that new construction home prices are going up. Lumber prices have been on a roller coaster ride. In September, lumber prices were at their all-time highs. The curve flattened late in the year. Forbes.com is forecasting higher springtime lumber prices than had been originally predicted.

 

Buyers Makeup

 

The makeup of buyers has changed slightly. There are even more buyers on the market this year. One reason is that Covid-19 has caused many people who were close to retirement to retire early. These retirees are flocking to southern states such as Georgia, Florida, Tennessee, the Carolina’s, Texas, and Colorado. Millennial’s have surpassed the baby boomers in the makeup of home buyers. According to the National Association of Realtors, millennials will make up 38%, the largest share, of home buyers. Many millennial’s are turning 30 years old, have steady jobs, are paying off their student loans, and are getting married and setting down. This results in their interest to buy homes. Investors are coming out of the cracks. With interest rates so low, money is cheap to borrow. This makes real estate a great addition to their investment portfolios.

 

Inventory

 

The inventory of available homes was low going into the 2020 market. Many home owners who were planning on selling last spring changed their plans because of the corona virus pandemic. This resulted in the inventory being even lower last year. As of right now, inventory is still extremely low in most parts of the country. Still many who have been putting their homes for sale on the market this winter had their houses selling right away. Many sellers are getting multiple offers on their homes. Some sellers are getting close to asking price, asking price, or even higher than the asking price for their homes. Inventory is expected to increase this year.

 

Forbearance’s

 

Mortgage forbearance is one reason the housing inventory may increase. The CARES Act of 2020 gave homeowners the opportunity to put their mortgages in forbearance if they couldn’t afford their mortgage payments. This allowed homeowners to delay their mortgage payments and keep their homes. Homeowners may have to start paying their mortgage payments again in March. Many people are saying that they won’t be able to, as they are still unemployed or their finances are still negatively affected by Covid-19. We may start to see more foreclosures on the market due to this situation. Foreclosures have been put on hold and are back-logged. This will bring more inventory to the market.

 

Covid 19 Vaccines

Covid-19-Vaccine

The Covid-19 vaccines are starting to rollout. This is putting more people at ease, in general. Many of the people who were afraid to put their homes on the market during the pandemic will finally do so this year, as we head towards herd immunity. This will also bring out the buyers who were waiting for the pandemic to playout as well.

 

Home Prices

 

Home prices continue to increase. They are expected to increase at a slower pace in 2021. According to a report from Zillow.com, home prices went up 3.2% in the last quarter of 2020 alone, which was the fastest pace of price appreciation since 1996. Lawrence Yun, the Chief Economist of the National Association of Realtors predicts home prices to increase 3% this year. With house prices going up and interest rates not likely to fall, some prospective buyers may get discouraged.

 

All in all, the 2021 real estate market will be strong as the country is starting to adjust to a new normal. The good news is that real estate is the leading factor in bringing the economy back to the strong economy it is was before the pandemic.