As the pandemic took shape in the spring of 2020, the housing market was disrupted. But low-interest rates, limited supply, and high demand resulted in a quick rebound and dramatic surge toward the end of the year.
Should we expect something similar or different this year as vaccines roll out and we begin to move past COVID-19?
Here’s what the housing market is expected to look like if you’re buying or selling a home in 2021.
What’s the Housing Market Going to Be Like in 2021?
Let’s look at three driving factors when it comes to housing market performance: interest rates, supply, and demand.
Interest Rates Will Stay Low
Interest rates are predicted to remain low—but slightly higher than in 2020. Mortgage rates will likely average 3.1% this year, according to The National Association of Realtors. That’s after setting all-time lows below 3% last year. The Mortgage Bankers Association projects rates will average 3.3% in 2021.
Experts at Bankrate predict rates will stay low enough to attract homebuyers and produce record mortgage volumes this year. Low-interest rates reduce buyers’ monthly payments and save thousands over the life of a loan. They also expand buyers’ budgets and make it possible for them to purchase a higher-priced home.
Supply Will Gradually Increase
Inventory is expected to remain low at first. This will keep home prices high and maintain a seller’s market. However, foreclosures expected from an expiring moratorium (plus an increase in new construction) will put more houses into inventory and potentially cause a flip to a buyer’s market.
As the economy recovers, sellers may start to feel more stable and confident about listing their homes. With several coronavirus vaccines in circulation, sellers are also expected to feel more comfortable about letting buyers attend open houses. By the end of the year, we could see inventory increase for the first time since 2019.
Demand Will Remain High
Low mortgage rates make buying homes more attractive. But there are still economic uncertainties because of the ongoing pandemic that could affect big financial decisions. However, the trend of moving from city to suburb is likely to continue as people who work from home seek more space and location options.
Redfin expects more than 14.5 million people to move across county lines this year. That’s more than a 25% increase since 2018 (when 11.4 million people relocated counties). Online real estate services continue to grow, which makes it easier for buyers to take virtual tours and purchase homes sight unseen.
What Do I Need to Know If I’m Buying a House in 2021?
If you’re buying in the next year, expect some stiff competition because it will take some time for inventory to increase. This means you won’t be the only one making offers, and you’ll need to remain flexible when it comes to negotiations and contingencies.
Forecasts show existing home prices will jump 3.1% this year. That’s less than half of the 6.7% increase we saw in 2020. When you follow trends from past years, the most expensive months will be June and July, while the cheapest months will be January and February.
As with everything else in 2020, the process of buying during the pandemic will depend on digital capabilities. This includes virtual home tours, Zoom meetings, and e-closings. While social distancing requirements may ease up because of vaccinations, the efficiency of online tools is here to stay.
What Should I Expect If I’m Selling a House in 2021?
If you’re selling in the next year, projected low mortgage rates will keep buyers interested. With a high demand for homes and a low housing inventory, you’ll have the advantage of a seller’s market for some time. You may be able to get more money than you expected.
If you have a large house, selling during the pandemic may be something you should consider. The desire for multigenerational homes is on the rise, according to the National Association of Realtors. If you live away from the city, your home may also be attractive to buyers looking for more indoor and outdoor space.
As renters become homeowners and a large number of Millennials and Generation Z enter the housing market, your home may be more appealing than you think. You don’t necessarily have to live close to a city or have easy access to major roads to draw in buyers.
What’s the Housing Market Outlook for 2021?
Now you know what to expect the housing market to look like in 2021 compared to 2020.
Low-interest rates will likely stick around and facilitate home-buying. However, sellers will have the advantage because inventory is expected to remain low for a while. This will change once the foreclosure moratorium ends and existing homes come into the market along with new construction.
If you’re looking to make a real estate change in 2021, New Again Houses can help. We buy properties, remodel houses, and sell homes. Whether you’re looking to buy or want to sell your home fast, contact us today!