2020 was a unique year for the housing market, but what should we expect to happen in 2021? Listen in as our broker, Evan Kaufman, forecasts the next several months in real estate.
We often get the question, when is the best time to buy/sell my house? Or, do you think the real estate market will continue the way its going? Or, will it be better to buy/sell this year or next year?
Although forecasting the real estate market can be difficult, and many different factors, such as a pandemic, will change those forecasts, there are several things that we can look at to gauge what the upcoming year might bring.
There are three major areas we considered when forecasting real estate trends in 2021.
A mortgage interest rate is how much you will pay a lender, based on your principal loan balance, for borrowing money to buy your home. The lower interest rate the better.
In 2020, interest rates hit historic lows - in some cases, all the way down into the mid 2%! To give a benchmark, in the early 1980's rates went all the way up to 16% and in 2010 the average was around 5%.
Moving into 2021, we looked to the Federal Reserve for an indication of what interest rates will do, and it appears that interest rates will remain low through at least the third quarter of this year. While there is discussion of raising them in the future, the Federal Reserve has openly stated that interest rates will continue to remain low.
This means for those of you looking to buy, you can continue to purchase homes at historically low rates which allows you to lock in lower payments far into the future.
In real estate, housing inventory means the number of properties being actively marketed as "listed for sale".
Although there were more homes sold in 2020 than there were in 2019, inventory was still tight. Part of the reason is due to homeowners being concerned to sell their home during the pandemic. Now with a vaccine on the horizon, we hope to see inventory continue to increase. Thankfully, research is also showing that homeowners are becoming more confident in listing their homes, especially as the economic situation after the pandemic has started to settle.
As with most years, we expect to see an increase in home sales during the Spring and Summer months. For buyers, especially those who have been disappointed with the selection of homes over winter, this means there will be more options available to choose from. Competition will most likely continue to be high, but with more inventory, the odds are better that you'll be able to get a home without battling a fierce bidding war.
Appreciation is the increase in a home's value over time. Whether or not a home appreciates is dependent upon the local real estate market and any improvements the owners made to the property.
For the last several years, homes have continued to appreciate. In 2020, we saw an average appreciation of 8%!
The National Association of Realtors is optimistic about 2021, expecting to see around 6% appreciation throughout the year. Others such as Fannie Mae and Freddie Mac estimate appreciation to float around 2%. Although the percentage of appreciation is hard to estimate, we do expect to see it remain above zero. This is a great thing for homeowners looking to list their homes - home prices are at an all time high!
When taking into consideration those continued low interest rates, increased housing inventory and steady housing appreciation, 2021 is looking to be a strong year once again for the real estate market.
We hope this information will arm you with a few tools to make more educated real estate decisions as we go into the new year. If you decide to take that next step to purchase a home or sell your own home, reach out to us to get matched with a real estate agent who understands your specific needs.
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Disclaimer: The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. You should always conduct your own research, due diligence and obtain professional advice before making any investment decision. WeVett, LLC & its members will not be liable for any loss or damage caused by your reliance on information or opinions contained herein.