We all know the pandemic fundamentally shifted the housing market in 2020. Though home prices were steadily rising before the world shut down, city dwellers flocked to the ‘burbs in droves in search of fresh air and some mask-free time outside in their backyard. Plus, the emergence of remote work created new rules and routines for families, requiring them to need more space to operate under the same roof. Now, more than a year later, vaccines are available to everyone in the United States, and we’ll soon no longer be under lockdown … But, many of us will continue working from home for the foreseeable future, if not indefinitely. So, how will the housing marketing shift? Will home prices fall? Mortgage rates rise? We checked in with real estate experts on their best predictions for what’s ahead in for the housing market in 2021.
Housing demand will continue to grow through summer …
According to Realtor AJ Olson Whitefield with Villa Real Estate, in Newport Beach, Calif., you may be out of luck if you were hoping to snag a killer deal this year. She predicts the hot seller’s market will continue through summer, which will be defined by low interest rates, low inventory, high demand and high competition. In Los Angeles, where she works, they saw a 51% drop in active housing stock in March 2021 compared to March 2020. Meanwhile, she says that in Orange County, homes only remain on the market for 21 days, compared to 54 days in 2019. This trend is mimicked throughout the country, and is even more extreme in hot spots like Nashville, Asheville, Austin and other places where city-dwellers have tended to migrate this last year.
… but will wane as the world opens up again.
For those who are excited to become first-time homebuyers, the current market can take the joy out of the process. Why? Because they end up paying more, experiencing more rejections, making more compromises and being forced to make big decisions quickly. While Whitfield doesn’t expect the market to bubble down significantly, she does believe the pent-up housing demand will slow toward the end of the year. Some people who moved from the city to the country may find it just wasn’t the right choice for them, and put their home on the market. (Because how much easier is it to call your super when something breaks than to hire a contractor?) However, Whitfield says our market slowing does not mean a drop in prices, but perhaps a return to negotiations between both parties.
Mortgage rates will slowly rise, but will remain attractive
MeiMei Wei from the Feast Realty Team at Winzone Realty in Elmhurst, N.Y., expects the current low mortgage rates — 30 years at 3.25% to 3.50% — to remain low and attractive in the housing market for 2021; slight increases may start to happen by the end of the year. And by tiny, she predicts 4% by 2022. For this reason, it’s essential to lock in a rate ASAP if you intend to buy soon. “Rate locks can be good for two months or longer and can become a huge asset if rates increase during the interim,” she explains.
Buyers will be willing to risk — and pay — more
As Tricia Turner, founder and CEO of Tricia Turner Properties Group, in Fulshear, Texas, says, risk is the name of the real estate game these days, and people are gambling to try and get the home they want. “Waiving financing was unheard of before, but that has become the new normal in the current market. Buyers are being forced to act fast,” she explains.
Unfortunately, with high risk does come high reward — but also at a cost. Turner predicts median home listing prices will reach an all-time high. “In March of this year, large cities and metros saw an average price gain of 12% compared to 2020,” she continues. “Houses for sale moved off the market six days faster than the same time last year. People are desperate to find a home, and they’re willing to pay more to get it.”
‘Coming soon’ will continue to replace the ‘For sale’ sign
Whitfield says 2020 saw a rise in the ‘Coming Soon’ sign instead of the traditional ‘For Sale’ sign — and it’s here to stay. If you’re unfamiliar, this is when buyers can get a preview of a home before it’s technically for sale. “It is a clever way to stir up interest, but it is commonly misunderstood,” she continues. “Technically, with ‘coming soon’ the home cannot be shown to anyone, and it is purely meant to be an online-only teaser to the market.” However, she says homeowners like it because it creates buzz while also allowing them to better control showings, and funnel people into pre-arranged set times for viewing.
Millennials will continue to make up more of the homeowner market
For many people, the pandemic was a wake-up call to what is truly important. And rather than watching their money wash down the drain with a rent payment every month, many people became thoroughly invested in the path towards home ownership. Millennials currently make up the largest segment of homebuyers from this past year, at 37% of the market, Whitfield says. She predicts this will only continue to grow as the 2021 housing market continues, and the years to come.