The past year was a challenging one for many Americans, so it came as a surprise that the real estate market was such a bright spot. Mortgage rates fell dramatically while home prices and purchases increased, and this momentum is expected to continue into 2021. Here is a summary of the National Association of REALTORS’ predictions for what’s in store for real estate in 2021.
Mortgage rates will increase slightly
Mortgage rates hit multiple record lows in 2020, ending the year at an average of 2.67% for 30-year fixed-rate loans. Rates are expected to rise in 2021, averaging 3.2% through the year and ending the year at 3.4%.
Home prices will increase modestly
In late fall of 2020, home prices skyrocketed. This momentum is expected to decelerate in the first half of 2021, then reaccelerate toward the end of the year, finishing with median home sale prices at 5.7% above 2020 levels.
Home sales will increase moderately
Existing home sales are expected to increase 7.0% above 2020 levels. This will be driven by remaining pent-up demand from 2020, millennial and Generation Z buyers purchasing first homes and the increased urgency from rising mortgage rates.
Housing inventories may improve
The end of 2020 saw more than half a million fewer homes available for sale than 2019. Thankfully, the pace of inventory declines is expected to slow throughout the year, and inventories may possibly increase by the end of 2021.
More Millennials and Gen Z-ers will buy homes
As the largest generation in history, millennials will continue to be an even bigger player in the housing market. The youngest of the generation will start to buy their first homes while the oldest are likely to be trade-up buyers. Generation Z-ers will also dip their feet into the housing market as they buy their first homes as well.
Remote work will be a continued consideration
Although the ability to work remotely is not a new concept, it prompted many into buying homes in 2020, even when most workers expected to return to the office. With remote work extending into 2021, buyers can expect to see more home listings that feature home offices, high-speed Internet connections and quiet backyards.
Suburban areas will enjoy a boost
The increase in remote work has freed many people from the necessity of commuting into urban areas, leading to more homebuyers to pursue the space and affordability of suburban living. Home shopping in suburban areas increased in the spring and summer of 2020 and is expected to continue into 2021.
Buyers and sellers will see continuing opportunities
Although home prices are expected to continue their steady rise, mortgage rates will remain fairly low, prompting homebuyers to make their moves before rates rise. However, sales will still go quickly, making it a challenge for first-time homebuyers in particular. Home sellers will benefit from all these trends.
Now that you know a bit more about some of the real estate predictions for 2021, you may be interested in buying a new home. The first step in doing so is getting preapproved. Get in touch today to get started!