And What’s on the Horizon for 2021?
It’s been just a little over a year since the United States was blindsided by the coronavirus pandemic. The stock market crashed. Everything appeared to come to a grinding halt. Social distancing, mask-wearing, and stay-a-home orders quickly became the new norm. Then the unexpected happened. Suddenly, buyers appeared en masse, eager to find themselves in a new home. Many were first time home buyers, millennials who had previously been reluctant to enter the real estate market. Spurred on by unbelievably low mortgage interest rates and a strong urge to leave communal living spaces behind (whether it be an apartment with roommates or a parent’s home with additional family members), they took the real estate market by storm.
The pandemic also changed the way we think of home and how we use our homes. At the start of the pandemic, the amount of time we spent at home increased drastically. Almost overnight our homes became classrooms, offices, gyms, cafes, restaurants, and entertainment venues. We relied on our homes to support far more activities than ever before. Of course, not every home was well suited for its new role. Many homeowners discovered their properties lacked the space and functionality to meet these covid-era demands and found themselves desperate to find a property that was more accommodating.
Even now that it appears we are entering a pandemic recovery phase, home owners aren’t willing to totally give up this new lifestyle. Lots of organizations have encouraged their employees to continue working remotely for an indefinite period of time, or even permanently. Many people have realized they can get adequate workouts in their basements or a spare bedroom. Some have discovered the joy of cooking and are eating out much less, but spending more time in the kitchen with other family members. All of these behaviors help save money, thereby affording a larger budget for a new home. That’s a good thing considering the U.S. median home price increased 12.8 % in 2020, hitting an all-time high of $266,250, according to ATTOM Data Solutions.
So what can we expect for the rest of 2021?
Mortgage rates are expected to remain low for the rest of the year
Yes, interest rates have ticked up slightly since the beginning of the pandemic in March 2020, but still remain incredibly low, even compared to recent years. According to Rocket Mortgage, in 2016, rates began rising after the presidential election. By the end of 2018/beginning of 2019, they had reached their peak around 4.65% for a 30-year FRM. The average rate for a 30-year FRM in March, 2021 was 3.32%.
Extremely competitive market conditions will continue for buyers
The news of historic-low inventory has been received and has many homeowners who might be thinking of selling their homes worried about where they will go if they sell their current home. Most sellers who are entering the market now are doing so because they have to; they are relocating to another area or combining households. Some are selling because they feel they need to make a major change in their housing. Homeowners seeking less change are choosing to stay put for now.
When will it change?
Spring and early summer could yield slightly more inventory. Some buyers, frustrated after months of losing out, may walk away for a while. This will certainly help alleviate some of the pressure, but just how much remains to be seen. The housing market is well known for its unpredictable nature. That’s one of the best reasons to have a knowledgeable, experienced real estate professional represent you and your interests. Our agents have weathered the storm and found new ways to serve their clients. By adapting to change, setting higher standards, and looking beyond the needs of today, we continue to work tirelessly to uphold your valued trust and make you feel at home.