Predictions for the housing market in 2020 were accurate. Freddie Mac forecasted that mortgage rates would be high, while Fannie Mae said that housing would bring about economic growth. Both predictions were undoubtedly correct, as we have seen in 2020. Even as economists ponder how the federal and state governments will handle COVID-19 and the economy next year, the housing market’s improvements will continue into 2021 following the economic rebound and affordability.
Below are some housing market forecasts and predictions for 2021.
1. Inventory
Surprisingly, the economic recession and spike in unemployment did not increase the number of distressed home sellers that would, in turn, increase housing inventory. Instead, there was a decrease in the number of houses in the market. Later on, in the fall of 2020, the inventory saw an improvement as more houses became available for sales than what was obtainable in the previous year.
We are foreseeing a continuous improvement in the inventory from the end of 2020 up to the spring of 2021. The inventory will improve such that by the end of 2021, it will spike for the first time since 2019.
2. Home Sales
By the end of 2020, we expect home sales to be 0.9% higher than in 2019 because of the strong buying season of 2020. However, at the beginning of 2021, home sales will reduce. Even with the low mortgage rates in the first half of 2021, buyers will not find the need to take advantage of the opportunity until they start to notice an increase in the second half of 2021. By then, buyers will rush to take advantage of the low mortgage rate. (You can learn more about mortgages and other real estate terms here.)
In 2021, home sales will be 7% higher than that of 2020 because the seasonal trend will normalize, and the rate of building new houses will improve from spring till the second half of 2021. The mortgage rates will have an average of 3.2% throughout 2021 and 3.4% by the end of 2021.
3. Home Prices
With the steady increase in the number of home sellers, home prices will continue to reduce into the spring and summer of 2021. At the end of 2021, home prices will increase a little, and the level for 2021 will be 5.7% higher than that of 2020.
4. Seasonality
Usually, during the Fall, the pattern changes to favor the homebuyers over the home sellers. But this was not so in 2020, and it became shocking for the buyers. In 2021, seasonality in the housing market will normalize, and investors will use 2020 as a base year to understand the trend.
5. Housing Trends
Home Offices
Suburban Migration
Because of the expansion in remote jobs and less need to commute to the office, many people will settle for affordable houses in suburban areas.
First-Time Buyers
In 2021, there will be an increase in the number of first-time home buyers. A large number of them will be Millennials and Gen-Zers.
Above are the predictions and forecasts for the housing market in 2021. Let this guide you as you plan for 2021. If you’re thinking of taking advantage of the housing market and investing in real estate this year, contact us today to see how we can help you get the most back on your return.