While 2020 has faced its fair share of ups and downs, we know one thing to be true: the real estate market not only met expert predictions, it surpassed them, breaking records along the way. The U.S. entered into a period of the best demographics for housing ever recorded. The years 2020-2024 would was projected to be a period when housing could outperform other economic sectors. During these years, total home sales should get to 6.2 million or higher.
Some experts are expecting home sales in 2021 to come in 7.0% above 2020 levels, following a more normal seasonal trend and building momentum through the spring and sustaining the pace in the second half of the year. While home sales are expected to lose some momentum over the last months of 2020, the shallower than normal seasonal slowdown creates a higher base of activity leading into 2021 that is roughly maintained for the first half of the year. As vaccines for the coronavirus become broadly available to the public, and economic growth reflects the resumption of more normal patterns of consumer spending, home sales gain even more in the second half of the year.
Prediction for Buyers and Sellers
The housing market in 2021 will be much more hospitable for buyers as an increased number of existing sellers and ramp up in new construction restore some bargaining power for buyers, especially in the second half of the year. Still-low mortgage rates help buyers afford home price increases that will be much more manageable than the price increases seen in 2020. With companies continuing to allow workers more flexibility, we see the inner as well as outer suburbs and smaller towns continuing to entice home buyers and builders. Areas that can ramp up affordable housing supply will benefit and see an influx of buyers. As for sellers, they 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.
The Housing Market and Foreclosures
The Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac (the Enterprises) has extended the moratoriums on single-family foreclosures and real estate owned (REO) evictions until at least January 31, 2021, giving relief to more than 28 million homeowners with an Enterprise-backed mortgage. Per the last three extensions, the FHFA said it will continue to monitor the effect of coronavirus on the mortgage industry and update its policies as needed. As of now record-low mortgage rates and shortage of inventory are keeping the US housing market strong concerning buyer demand. Both prices and sales have been surging month-over-month breaking new records.
Nationwide one in every 13,581 housing units had a foreclosure filing in November 2020. A total of 5,256 U.S. properties started the foreclosure process in November 2020, down 13 percent from last month and down 79 percent from a year ago. While foreclosure starts are down in many states across the nation, a few states did see monthly increases in foreclosure starts in November 2020, including Missouri (up 18 percent), Indiana (up 14 percent), Georgia (up 4 percent), Arizona (up 1 percent), and Texas (up 1 percent).
Among metropolitan areas with a population greater than 1 million, those with the greatest number of foreclosure starts in November 2020 were New York, NY (454 foreclosure starts); St. Louis, MO (208 foreclosure starts), Chicago, IL (207 foreclosure starts); Miami, FL (151 foreclosure starts); and Los Angeles, CA (147 foreclosure starts).
Will There Be a Rise or Fall?
With so much economic uncertainty surrounding in 2020, many have speculated if we’ll be hit with a housing market crash this year. To quell any concerns, a housing market crash or recession is highly unlikely in 2021. The initial impact of quarantine lockdowns has since seen gradual improvement as favorable interest rates have boosted home buyer confidence. In fact, even though we’re facing another spike in COVID-19 cases, the most negative impact we’re likely to see is a short-term decline in rental units before reentering a period of steady recovery. Due to high demand and low housing inventory, the 2021 real estate market will favor sellers for the most part. However, a Haus forecast did predict a drop in home prices between 0.5% – 2.5% from October 2020 to July 2021.
In conclusion, with so much uncertainty affecting our jobs, the economy and day-to-day life it can feel incredibly difficult to plan for the future. But with expert forecasts and market patterns, we know to expect a red-hot seller’s market in 2021 – it could be a great time to list your home, especially if you’re in a suburban area. Although 2020 was tumultuous and 2021 may seem daunting, it’s important to keep in mind that the housing market is leading our economy toward recovery, and we shouldn’t expect an oncoming market crash.
Fairweather, Daryl. (2019, November 25). Predictions: More Buyers + Fewer Homes = more bidding wars. https://www.redfin.com/news/2020-housing-market-predictions/