The new year is in full swing, and predictions are flying as to how the 2021 real estate market will turn out. After 2020, many are looking forward to what will hopefully be a better and more fruitful opportunity for investors and those looking to buy or sell a home. So, who will come out on top in the 2021 real estate market? Will prices rise or fall throughout the coming months? We complied the answers to these questions and many more from some of the industry’s top experts. Join us below to find out more.
Top 5 Expert Predictions for the 2021 Real Estate Market
When it comes to predicting what the real estate market will do in 2021, data is critical. Let’s review some key predictions from five of the industry’s top authorities on all things real estate. Continue reading below!
It is no doubt that the pandemic has presented the real estate market with some unique challenges to overcome in 2020. Zillow concurs with many experts that 2021 will see near record-breaking home sales and potential growth. Additionally, Zillow expects rising mortgage rates to create even more buying frenzy during the first half of the year. Furthermore, those individuals concerned about the status of their jobs or working from home are feeling more certainty and are, in turn, willing to settle down in one location long term. Another key prediction is a resurgence in urban areas that many fled from during the pandemic. Only time will tell!
Many outlets and experts, including Realtor.com, predict 2021 will see a continued seller’s market. Buyer competition is fierce in many areas across the US as inventory cannot meet the growing demand. That said, Danielle Hale, the chief economist for Realtor.com, says that the inventory for 2021 will slowly begin to catch up. Ultimately bringing a little relief to buyers scrambling for their next home. According to Danielle, those buyers who hold out for more selection towards the end of the year will face affordability challenges as prices rise to nearly 6%. Furthermore, Realtor.com estimates that mortgage rates will also go up around 3% in 2021.
National Association of Realtors
The COVID-19 pandemic hindered home sales in some areas while they skyrocketed in others. According to the National Association of Realtors, the real estate market in 2021 could see an over 9% jump in existing home sales. That said, new home sales could climb over 20%. However, along with that rising demand comes rising prices. The chief economist for the NAR, Lawrence Yun, predicts that home prices and mortgage rates will rise around 3% as we continue through 2021. It remains to be seen whether President Biden follows through on the home-buyer tax credit promised during his campaign. If enacted, this could provide much-needed aid to homebuyers struggling to come up with a down payment. Also, according to Yun, nonqualifying mortgages are making a comeback!
Redfin, like many others, predicts the real estate market in 2021 will remain strong. They predict that as the COVID-19 pandemic becomes more under control, the 2021 market could be the best for home sales since 2006! That said, even as inventory levels creep up to meet demand, the unbalance will create opportunities for new construction to bridge the gap. Redfin’s chief economist Daryl Fairweather believes that home sales will grow from the 5% seen in 2020 to more than 10% throughout 2021. While much remains to be seen, there is no doubt that the rest of the year will produce a strong market with rising demand, increased cost, and slowly but still rising mortgage rates.
Mortgage Bankers Association
According to Mike Fratantoni, chief economist for the Mortgage Bankers Association, the real estate market has been a real triumph in the economic recovery during COVID-19. That said, Fratantoni predicts that mortgage originations will fall in 2021 from the huge surge that closed out 2020. Also, prices could rise more than 5% along with climbing mortgage rates.
Real Estate Market Trends for 2021
As experts weigh in on what the future of 2021 holds, several emerging trends affect buyers, sellers, and investors alike. Continue reading as we review some of this year’s top real estate market trends below.
- An Impending Affordability Crisis
- Below Average Mortgage Rates
- Rising Delinquencies and Foreclosures
- Booming Single-Family Construction
An Impending Affordability Crisis
Supply is still not growing as fast as the demand for available houses on the market. Thus, prices are increasing. While experts may not completely agree on just how much those prices will rise, everyone agrees that they will. Furthermore, mortgage rates are expected to slowly increase as the year continues. This will only exacerbate the affordability issues brought on by rising costs.
Combining these factors makes it difficult for buyers to save the necessary amount to afford prices in the competitive 2021 real estate market. That said, the COVID-19 pandemic still lingers, and the economy is bouncing back. Many national surveys point to growth trends for housing sales, rental rates, and home prices.
Below Average Mortgage Rates
Mortgage rates, at least for now, remain low. However, it is still not low enough to make up for the increased prices in many real estate markets. Furthermore, as 2021 continues, mortgage rates are predicted to stop falling. That said, predictions vary among experts; however, many think rates will stabilize between 3.1% and 3.3%.
Rising Delinquencies and Foreclosures
During much of the pandemic, government moratorium protected homeowners struggling financially from facing foreclosure. However, last year ended with a near-record number of significantly delinquent loans. The types of loans that make up the backlog of foreclosures include –
- Individuals that were in foreclosure before any government moratorium
- Loans that would have defaulted under normal circumstances
- Any loans in default due to job losses induced by the pandemic
For now, the Federal Housing Finance Agency announced that Freddie Mac and Fannie Mae had extended single-family home foreclosure and real estate owned eviction protection through February 28, 2021.
Booming Single-Family Construction
After the pandemic fueled delays and supply chain shortages, builders are rushing to fill the growing demand for new construction. However, the rising costs of materials and the need for builders to maintain profits negatively affect affordability.
Every new year’s real estate market brings with it its share of challenges and opportunities. For investors and landlords, rising costs and added competition might prove challenging. Thankfully, whether you are growing your portfolio or trying to keep the one you have afloat, Bay Property Management Group can help. We offer property management services
Our team of industry experts can help landlords navigate the changing regulations and added challenges that COVID-19 continues to cause. Reach out today and speak with one of our dedicated employees to see how a full-service approach to property management can make a difference in your portfolio.