Housing Market Predictions for 2021
What factors will play a significant role in this year’s housing market?
Despite the global pandemic and ensuing economic recession, 2020 saw home sales jump to a level not seen since 2006. After pausing in the spring, the second half of the year saw record-breaking growth due to rock-bottom mortgage rates and pent-up demand. Housing prices also rose to new record highs fueled by a shortage of available inventory.
While housing predictions for the longer term will largely depend on the lingering impact of the pandemic, all indicators point to continued growth. The housing market could continue to play an important role in the country’s overall financial recovery with home sales expected to stay above pre-pandemic levels through 2021.1
While it’s difficult to predict when the economic effects of the pandemic will begin to subside, the following factors will play a key role in determining how the 2021 real estate market shapes up:
- Seasonality.While home sales are expected to remain strong well into 2021, seasonal trends should normalize. Realtor.com predicts that the frenzied pace that continued into late 2020 will slow to more normal levels, with strong spring and summer homebuying seasons as vaccines become more widely available and we resume more normal patterns of consumer spending.
- Mortgage rates. Rates are expected to remain low at an average of 3.2%.1 While some predict an uptick later in the year, overall mortgage rates are expected to remain near record-lows as far out as 2022.3
- Millennials. With the largest generation in history in their prime home-buying years, many will be looking to trade up to larger homes as they expand their families and need more space. Many Gen Z-ers are also expected to buy their first-time homes, with both groups keeping upward pressure on home prices.
- Suburban migration. Buyers seeking affordability and space have flocked to neighborhoods outside dense city centers. With many no longer tethered to downtown offices, homes with views, more land, and home offices are all the rage. This trend will likely continue, with 20-30% of the workforce still expected to be working at home for multiple days per week at the end of 2021.4
If you’re looking to buy a home in 2021:
With interest rates predicted to remain low, it’s a great time to lock in low monthly mortgage payments for future years. Experts predict home price growth to slow as more sellers enter the market, but prices are still expected to appreciate by nearly 6% in 2021.5 An experienced Realtor can help you navigate your options, especially in markets with tight housing inventory. It’s crucial to work with a professional when demand is high in order to negotiate the best deal and avoid costly mistakes.
If you’re looking to sell a home in 2021:
The upcoming year is predicted to be a seller’s market, giving homeowners an edge with negotiating prices. But if you’re planning to sell your property, you’ll need to take COVID-19-related factors into account. Realtors across the country have quickly adapted to the current situation and are ready to offer guidance to help sell your home during the pandemic. They can set up virtual tours and livestreamed open houses that will enhance your chances of securing multiple offers— and the best return on your investment.
2Realtor.com 2021 Forecast
3“Mortgage Rates Hold Steady at Record Lows,” Housingwire, December 2020.
4“What’s next for remote work: An analysis of 2,000 tasks, 800 jobs, and nine countries,” McKinsey, November 2020.