At this time last year, experts were predicting the 2020 housing market would see relatively flat home price growth, tight inventory for first-time buyers, and an increase in mortgage rates. We all now know what happened next: The COVID pandemic. Though there was an initial pause for homebuyers in mid-March to mid-April as would-be sellers decided what to do next and some homeowners opting to refinance instead of list their home after rates hit new lows, the housing market ended up even hotter than ever. Demand outpaced inventory, leading to higher prices in nearly every region.
While 2020 was a lesson in expecting the unexpected, the housing market has adapted to the “new normal.” The trends we have seen over the past year, along with increasing certainty regarding the availability of a COVID vaccine, provides data points for making predictions for the 2021 housing market. Here is what you can expect to see, whether you are buying or selling your home in 2021:
Home values (and prices) will continue to rise — for the time being.
According to research by Redfin, housing prices have increased roughly 13% in 2020. Reports show that certain areas saw more growth than others.
However, depending on the economic growth, which is predicted to be slower, we could see easing in housing competition and thus prices not appreciating as fast as they have in the last part of 2020 and the first quarter of 2021. There is also a possibility we could see some foreclosures occur as a result of forbearances ending and homeowners that are not able to recover financially from the COVID-19 shutdowns. While this will likely be a very low percentage of those that entered into forbearance, there will be some resulting foreclosures. One survey completed suggested that as many as 18% of those in forbearance would receive a foreclosure notice within 1 year of the forbearance ending. https://pulsenomics.com/surveys/#home-price-expectations. These factors are not likely to cause a depreciation in the market, only a slight easing in the current speed of the appreciation the market is currently experiencing.
What to do about it
If you’re planning to sell, signs are pointing to listing as early as you can. If you are interested in buying your first place, you may have more to choose from and less competition in the latter half of the year.
There’s going to be more new construction.
Depending on COVID regulations, many construction projects ended up on hold. This affected new construction inventory, along with mixed-use residential-commercial projects designed to revitalize many neighborhoods. Housing projects began picking up in October, which means that things will pick up where plans left off in 2020.
What to do about it
New construction tends to fall into two categories, luxury and 55+ developments. If your home is on the higher-end or in an area popular with the “active adult” demographic and you plan to sell this year, new construction presents some competition. Let’s sit down to get up to speed on planned new construction in your area and develop a strategy if it could impact your potential sale. It’s also worth discussing if there are big commercial projects still in the works (for instance, high-end shopping centers or interesting event spaces designed to revitalize your area). If these projects are still planned, it only makes your property more attractive to potential buyers.
If you’re more concerned about buying, this news simply gives you more options to consider if you prefer new construction housing.
The remote workplace might be here to stay.
Though some industries plan on returning to their offices, many more are realizing that a virtual workforce is more workable (and presents many savings for the company). If you are located near office parks, downtown cores where trendy start-ups normally flourish, and other areas once prized for commutability, there may be less demand if these companies go fully remote.
What to do about it
The remote workforce also has changed the demands many potential buyers have, so you may have to stage or adapt rooms to appeal to the new normal. Now, home offices are a must (and dining rooms, guest rooms, and other entertaining-oriented features are less in-demand), Zoom sightlines are considered, utilities (cable/internet) are scrutinized, and smart home features are all bonuses.
Further, the at-home workforce has adapted to fulfilling their free time at home. Indoors, a media center helps fill downtime and entertain kids. If you have an outdoor space, style it with the care you would take for interior spaces. A fire pit, comfy chairs, outdoor kitchens, outdoor media centers and pools are also going to be a plus for buyers who have grown too used to quarantine.
There is no predicting where remote workers will move, as it is all up to the individual. However, some trends can be foreseen. If you are in an area that tends to be popular with vacationers, do not be surprised if more full-time residents may want to call your town “home.” If you are in a suburban region with great schools and reasonable-priced housing that is somewhat near a major city, you will probably be getting new neighbors. The marketing plan around selling your home should include resources for those moving in from out-of-the-area.
For potential buyers, similar assumptions can apply. If you are looking in an area that has something interesting to offer but has been traditionally affordable due to distance from cities or a lack of full-time employment options, there may be more competition.
Interest rates will remain low.
Over the course of the last 12 months, interest rates have dropped to historic lows. Recent announcements indicate that these low rates are here to stay. These lower rates can increase the buying power of people looking to buy homes.
What to do about it
Speak to your lender about your affordability, and payments. If you are a first-time buyer, your affordability is probably more than you think. If you need to sell before you buy, you get to enjoy the double benefit of selling in a hot market, while buying in a market with extraordinarily low-interest rates. Reach out to your lender to find out what your new affordability may be.