The housing market was one of the quickest sectors to rebound in 2020, with sales and prices hitting levels that have not been seen for a decade. As the economy continues to recover into the new year, we take a look at Realtor.com’s 2021 Housing Market Forecast to see what lies ahead.
The Return of the Seasonal Market
April has traditionally been the best time to list a home for sale. However, April 2020 was far from typical. In 2021, though, Realtor.com suggests a return to traditional real estate seasonality, which could see a strong spring and summer market that slowly declines as we approach the end of the year.
Home Sales in 2021
The economic disruption of 2020 saw a slow real estate market escalate to record sales in the fall, as pent-up demand materialized into homebuying. Low mortgage rates of around 3% were a driving factor.
As 2021 homebuyers take low rates for granted, the market may slow during the first half of the year. However, if mortgage rates climb past 3%, more activity may result as homebuyers try to quickly find a home and close with a low-interest rate.
In addition to trade-up buyers, Millennial and Gen-Z first-time homebuyers will contribute to the market’s strong demand, possibly resulting in a steady growth rate.
As buyers outnumbered sellers in 2020, home prices rocketed up 10% by the fall. However, these gains should settle down as more sellers enter the market in 2021. First-time buyers and Millennials should keep the market active, but price increases are expected to slow during the spring and summer before giving way to an increase of 5.7% by year-end for exiting home sales.
Home inventory continues to be an issue in 2021 carried over from last year, with construction delays due to COVID-19 exacerbating the problem. As things return to normal in 2021, housing inventory should improve slightly and increase for the first time since 2019.
Key 2021 Housing Market Trends
Here are three key trends to watch with the 2021 housing market.
Millennials & Gen Z
As Millennials continue to make up a larger share of the market, their influence becomes more pronounced. Millennials turning 40 may trade-up as they seek more space for their families, while younger Millennials (now as old as 24) enter the market as first-time home buyers.
Low mortgage rates in 2020 encouraged Millennials and Gen Zs to take on bigger mortgages with smaller down payments to secure low-interest rates while also using the opportunity to move to larger homes or more desirable neighborhoods. These trends should continue in 2021, as fears that COVID-19 related income disruption may cause younger generations to use their savings for monthly expenses rather than a down payment on a home.
Suburbs should continue to perform well throughout 2021, as work from home becomes more commonplace. The desire for extra living space, outdoor space, and less commuting resulted in many city dwellers swapping smaller apartments for suburban homes last year.
In 2021, as suburbs continue to offer affordable and desirable home options, this trend should continue.
COVID-19 accelerated an existing trend toward working remotely in the information economy. Before the coronavirus crisis, as many as 1 in 3 workers reported working from home. Even as many workers return to the office throughout 2021, homes that facilitate remote work should become more popular, with office space, high-speed internet, outdoor space, and nearby shopping becoming decisive factors for homebuyers.
What is in Store for Homebuyers?
For homebuyers, 2021 has the potential to be a good year. As construction projections deliver much-needed inventory to the market and interest rates stay low, it will become easier for buyers to purchase a home. And as remote work becomes more popular, suburbs and small towns should see an uptick in demand.
For first-time buyers, 2021’s fast-moving real estate market may represent a steep learning curve. Perhaps more than ever, homebuyers prepared to make educated decisions can excel in this year’s competitive housing market.
What is in Store for Home Sellers?
Although the real estate market’s growth rate is expected to slow, home prices should hit new highs in 2021. With low mortgage rates and no shortage of buyers, homes should sell quickly as prices continue to rise.
Marimark Mortgage is based in Tampa, Florida, and serves the mortgage needs of homebuyers, homeowners, and investors in Florida, Virginia, and Pennsylvania.
We specialize in conventional home mortgages, FHA, VA, and USDA mortgage options, refinance loans, and reverse mortgages. We’ve worked extensively with cash-out refinancing and help clients to lower their monthly mortgage payments.