After a rollercoaster 2020, what will the 2021 housing market look like?
While last year was filled with challenges, economic struggles, and stay-at-home orders, the housing market was booming during 2020 with a large buyer pool taking advantage of record-low mortgage rates and pandemic migration was in full effect.
Expect the post-pandemic economic rebound, improving job conditions, and stable interest rates to continue in 2021, according to a survey of more than 20 top U.S. economic and housing experts, as outlined by the National Association of REALTORS® in their recent Real Estate Forecast Summit.
The 2021 housing market will be stronger than 2020
As the vaccine distribution begins across the nation, and schools and local economies begin to reopen, hesitant sellers and buyers will enter the market after having waited to make a move until now. Industry experts weigh in with their predictions for the upcoming year:
“Demand continues to stay high, and is expected to surge in cities as economies reopen. Annual home sales growth is expected to be the highest in almost 40 years as life and financial certainty brings more sellers into the market to meet the heavy demand and technology allows for faster connections with interested buyers. Even so, home prices, mortgage rates and rents are likely to rise, bringing affordability challenges that must be faced.
We expect 2021 will be a year unlike any other as the housing market responds to the challenges and changing preferences that emerged in 2020.” – Jeff Tucker, senior economist, Zillow (Zillow Research)
“With home builder confidence near record highs, we expect continued gains for single-family construction, albeit at a lower growth rate than in 2019. Some slowing of new home sales growth will occur due to the fact that a growing share of sales has come from homes that have not started construction. Nonetheless, buyer traffic will remain strong given favorable demographics, a shifting geography of housing demand to lower-density markets and historically low interest rates.” – Robert Dietz, senior vice president and chief economist, National Association of Home Builders (Forbes.com)
“Despite the challenging economic conditions for many households, for those fortunate enough to continue to have stable income, house-buying power is the highest its ever been because of historically low mortgage rates. As more and more potential home buyers rush to take advantage of sub-three percent mortgage rates in an environment of limited homes available for sale, multiple-offer bidding wars become the norm and prices are pushed higher.” – Mark Fleming, chief economist (First American)
“The interest rates will continue to be favorable since the Federal Reserve has indicated such. And supply will rise based on the higher number of housing starts of single-family homes. This will give consumers more choices, and more importantly, will tame home price growth. Demand could be stronger in the outlying suburbs and in more affordable metro markets, while the downtown locations could witness softer demand.” – Lawrence Yun, chief economist, National Association of REALTORS® (Forbes.com)
Looking ahead to 2021
- Homebuyers will continue to leverage technology in their home buying process, searching homes and communities from the comfort of their couch at their convenience
- Housing affordability may become a challenge for buyers with expected rapid price growth and slightly higher mortgage rates in 2021
- The trend of Millennials entering the real estate market in the suburbs and mid-size markets is expected to continue
- Sellers will continue to see top-dollar sales and strong demand contributing to rising home prices
- Pandemic migration factors and Zoom Towns will continue to gain traction with many remote workers seeking more flex and outdoor space to accommodate their new homeownership needs in the place they once loved to vacation, but now wish to permanently call home
- The supply and demand imbalance could continue into the year ahead, though new construction is expected to pick up
Advice for buyers and sellers
Although the pace will slow from late 2020’s frenzy, fast sales will remain the norm in many parts of the country which will be a challenge felt particularly for first-time buyers learning the ins and outs of making a major decision in a fast-moving environment. Buyers who prepare by honing in on the neighborhood and home characteristics that are must-haves vs. nice-to-haves and lining up financing including a pre-approval will have an edge.
Sellers will be in a good position in 2021. Home prices will hit new highs, even though the pace of growth slows. Buyers will remain plentiful and low mortgage rates keep purchasing power healthy, but monthly mortgage costs will rise as mortgage rates steady and home prices continue to rise. Sellers hoping to see further double-digit price gains will likely be disappointed, but those setting reasonable expectations can expect to see a timely sale and will want to focus on their next move. (realtor.com)
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Let’s work together
Homeownership needs are evolving, companies have realized the effectiveness of working from home, and with the desirability of the Central Oregon lifestyle, we’re experiencing an extremely competitive housing market here locally with a large pool of buyers and a lack of available home inventory on the market.
If you’re thinking of buying or selling, we welcome the opportunity to work with you. We know our local market and we can strategically determine your best move forward.
Get in touch via the form below and we’ll follow up promptly: