Many experts are predicting another strong housing market in 2021. They are forecasting increased demand from buyers who delayed purchasing homes because of the pandemic; from existing homeowners who need larger spaces to accommodate parents working from home and children attending school virtually; and from condo owners who are seeking to escape multifamily buildings for single-family houses to mitigate exposure to the virus. The ability to tour homes and close on purchases virtually will make buying a home simpler in 2021.
Young adults fueled the increase in home sales in 2020, with millennials making up the largest share of home buyers at 38 percent. Higher earners — often less affected by the pandemic’s financial repercussions — also accounted for higher home sales in 2020.
But first-time buyers are likely to face headwinds in 2021. Buyers need more money than ever before to buy a home. According to the National Association of Realtors, the median household income of first-time buyers in 2020 was $80,000, up from $68,703 in 2019. The median household income of repeat buyers was $106,700.
Affordability worsened in much of the United States in the fourth quarter of last year as median home prices were up at least 10 percent in most of the nation, according to a report by Attom Data Solutions. The report found that 275 of 499, or 55 percent, of the counties it analyzed, were less affordable in the fourth quarter of 2020 than past averages. That’s up from 217 in the fourth quarter of 2019 and 164 in the fourth quarter of 2017.
Here’s a look at what the housing experts expect in 2021.
National Association of Realtors
Home sales set a number of records last year despite — and in some cases, because of — the coronavirus pandemic. Although the final data for 2020 has not been released, the trade association for real estate agents expects new-home sales to come in 20 percent higher and existing-home sales to come in 3 percent higher than in 2019. NAR chief economist Lawrence Yun predicts new-home sales will jump 21 percent and existing-home sales will climb 9 percent in 2021. He predicts home prices will rise by 3 percent in 2021.
“The consequent rise in home prices has boosted wealth accumulation for homeowners,” Yun said. “But the opposite side of this will mean the continued decline of housing affordability and will limit future homeownership opportunities for young adults if housing supply is not greatly increased.”
Yun says mortgage rates will rise to 3.1 percent in 2021.
“The Biden presidency could bring several impactful changes to the housing market,” Yun said. “The home buyer tax credit he proposed as a candidate would help Americans cover their down payment costs and is likely firmer assurance of government guarantees to mortgages backed by Fannie Mae and Freddie Mac. In addition, new appointees at the Federal Reserve are likely to pursue an expansionary monetary policy for a longer period, which should keep interest rates stable over the next few years.”
NAR identified 10 markets that have shown resilience during the pandemic and which should perform well in a post-pandemic environment: Atlanta; Boise, Idaho; Charleston, S.C.; Dallas-Fort Worth; Des Moines; Indianapolis; Madison, Wis.; Phoenix; Provo, Utah; and Spokane, Wash.
The real estate listings website predicts 2021 will be a robust sellers’ market as home prices hit new highs and buyer competition remains strong. Inventory is expected to make a slow but steady comeback, which will give buyers some relief. However, increasing mortgage rates and prices will make affordability a challenge throughout the year.
“The 2021 housing market will be much more ‘normal’ than the wild swings we saw in 2020,” said Danielle Hale, chief economist at Realtor.com. “Buyers may finally have a better selection of homes to choose from later in the year but will face a renewed challenge of affordability as prices stay high and mortgage rates rise.”
Home prices could reach new highs in 2021, climbing by 5.7 percent, as growth continues but at a slower pace. The number of homes for sale will slowly rebound, offering buyers some relief. The number of homes for sale in the United States reached an all-time low in December, dipping below 700,000 for the first time.
Realtor.com expects existing-home sales to rise 7 percent and single-family housing starts, which are new residential construction projects that are just getting underway, to grow by 9 percent. Mortgage rates will steadily move higher, reaching 3.4 percent by year’s end.
Realtor.com also selected 10 markets where it expects to see the strongest home price and sales growth in 2021. They are: Sacramento; San Jose; Charlotte; Boise, Idaho; Seattle; Phoenix; Harrisburg, Pa.; Oxnard, Calif.; Denver and Riverside, Calif.
Scott shares that, “2020 and COVID-19 impacted each and every one of us.”
” It’s a unique time in history where humankind all seemed to be fighting the same something for such a long period of time. Of course, we have all heard how difficult last year was for so many of us, but as a community, we tend to rise to new heights when faced with adversity. I know that personally, I was able to tap into and lean on already existing technologies that I was either apprehensive to try (or thought that our old way of doing things was still what was best.)” From marketing to showings, to legal updates, we were able to adapt to continue to move forward through (and thrive in) a virtual environment.” Scott also forecasts that this year may continue on a positive outlook for 2021. He adds, “This year is shaping up to be one of the hottest seller markets in history! Inventory continues to stay low, and seems like it will continue to do so (even with rates starting to tick up.) I think we can safely predict that 2021 will be as strong (or stronger) than the 2020 market!”
Doug’s approach to the market last year gives a perspective that may not be taking into account by most but there are a number of jobs people have retired early from or left or taking a break from due to Covid 19. Doug states, “Covid did not impact our market other than many agents stopped working because of it and it gave us more Sellers and Buyers to work with. The only negative is that inventory is very low so it has become a Sellers Market. Many did not put their homes on the market last year because they did not want buyers coming through. Also, rates continue to be low so many more buyers are looking to buy.” Doug adds, “This year is going to be another great year for Real Estate as rates remain low and sellers are getting top dollar without having to do repairs they would usually do.”