As we approach the 2021 housing market, you may wonder what to expect as a home buyer or seller. Will home prices drop, stay the same or increase? Will mortgage rates stay low? Will the COVID-19 vaccine affect the housing market? Let’s take a look at what experts predict for the housing market in the upcoming year.
If you're thinking about buying or selling a home in 2021, it's important to look at some of the predictions from industry experts. Knowing when to sell so you can get the highest return on your home, when to buy so you're not overpaying, how the coronavirus will affect the housing market, and how President Biden plans on improving housing, all play a role in what the house market might look like in 2021.
National Association of Realtors® Housing Forecast
According to NAR Chief Economist Lawrence Yun, the housing market in 2021 looks favorable. He predicts that there will be a 23% increase in new home sales (new construction) and a 9% increase in existing home sales (previously built). He expects mortgage rates to hover around 3%, similar to what we’re seeing in today’s market. All of these factors will be beneficial to home buyers and sellers. Buyers will need to act fast when they find a house they like because buyer competition will be as strong if not stronger than it was in 2020.
He also mentioned the chance for a stricter lockdown due to the rise in coronavirus-related infections and deaths which would change the housing market outlook. He strongly believes we need to continue to social distance and wear masks so the virus can be contained and the job market can thrive again. He also predicts that as the masses get vaccinated for COVID-19, it could stimulate the economy as more and more people start spending.
Foreclosures May Boost Housing Availability
Economists believe that foreclosures will not be a strong factor until we’re well into 2021. There is a lot of mortgage forbearance currently and until that ends we won’t know how many of these homes will end up in foreclosure. Once mortgage forbearance ends and the backlog of prior foreclosures are cleared, a new group of foreclosed homes can be processed. Buyers will have an incredible opportunity in their local housing market to buy this inventory once it hits the market, if they can secure funding or pay in cash. If there are an exceedingly large number of foreclosed homes without a lot of buying demand in 2021, home prices should drop.
The introduction of a COVID-19 vaccine will affect the housing market in 2021. According to a Pfizer news release, their vaccine is 95% effective against COVID-19. As more and more people get vaccinated, a large percentage of employees will return to work, the economy will start to recover and mortgage rates may climb.
Many will continue to work from home and that means they could live anywhere, including places that are more affordable. Many will simply want to move to the suburbs, a trend we’ve seen throughout the pandemic. Some will move to more affordable states, if their job allows. Those who purchased rural homes may return to the cities or own homes in both areas. This is good news for buyers and sellers. Many sellers will be putting their houses on the market and buyers will be looking to buy if mortgage rates stay low.
Despite the rollout of a vaccine, open houses and showings “... are not going to go back to the way they were... immediately (if ever)” according to Michael J. Franco, a New York City-based Compass agent. As open houses start to return to normal, it will be likely that the number of people allowed in a home at the same time will be limited. For some people there’s just no substitute for seeing a house in person. For others, the convenience of viewing a house online will keep them from ever going to an open house in person.
President Joe Biden’s Plan
Over the next 10 years, President Joe Biden hopes to invest $640 billion to ensure every American has access to affordable, safe, energy efficient housing located near good schools and within a reasonable distance to jobs. He hopes to end discrimination and unfair practices in the housing market, provide more down payment assistance, fund federal rental assistance programs, and work toward ending homelessness. If this type of action can take place in 2021 and throughout his presidency, we’re moving towards a positive outcome for housing in America.
2021 is right around the corner and the housing market is looking similar to what we’re seeing right now. Many predict that it will continue to be a seller’s market due to low mortgage rates and buyers wanting more space. NAR predicts that we will see an increase in new construction and existing home sales. With more and more people getting vaccinated, we will likely see more spending which will boost the economy. Housing prices may be less inflated giving buyers an opportunity to own a home without breaking the bank. Whatever becomes of the housing market in 2021, we hope a COVID-19 vaccine will help us return to normal.