If you held off on buying a home in 2020, no one can blame you. It was a year marked by volatility, with the COVID-19 pandemic creating economic uncertainty across industries, causing many to worry about their own financial future. Meanwhile, many housing markets remained red hot with high prices and homes selling in only one or two days. For many, it all just felt too chaotic to move during this time. But with the arrival of vaccines and the end of the pandemic hopefully coming closer, many buyers are turning their attention to the new year. Here’s a look at the 2021 housing market and what prospective buyers need to know about home buying in 2021.
2021 Mortgage Rates
The two biggest things most prospective buyers want to know about are predictions for mortgage rates and home prices. After all, these are the two factors that will ultimately have the biggest impact on your finances. So, let’s start with mortgage rates.
Mortgage rates fell to historic lows in 2020. The average rate for a 30-year fixed loan bottomed out at 2.67% in December, according to Freddie Mac. But the average for the year was actually 3.125%. So where do we go in the new year? NerdWallet predicts the average will actually fall further to around 3.075% for 2021. Other forecasts aren’t so optimistic. But when you consider the average was 8.05% in 2000 and 4.69% in 2010, those are still very friendly rates.
2021 Housing Prices
As for housing prices, unfortunately for buyers, the housing market forecast for 2021 looks to be a seller’s market. Housing prices are expected to continue to climb in many parts of the country. Overall, median housing prices are projected to increase anywhere from 2.7% to 5.7%. That’s a significant jump to take into account as you try to determine how much house you can afford. However, when you look at the entire life of the loan, the low interest rate may make up for the slightly higher purchase price. You will have to consider the complete financial picture to determine if now is the best time to buy.
As always, it’s important to note that there is no single housing market. Conditions can vary significantly from state to state, city to city and even neighborhood to neighborhood. So, make sure to work with an experienced agent who can help you navigate the local market.
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A Different Home Buying Experience
While we all can’t wait to get “back to normal,” the experience of home buying in 2021 will still be a little different than it was pre-pandemic. This will be especially true in the spring buying season as vaccines will still be in the early stages of rollout. For one, you may see more virtual home tours instead of traditional open houses. Many agents transitioned to virtually showing homes, so you still get a good home buying experience.
Likewise, many lenders and agents may prefer to conduct virtual meetings as you go through the home buying process. This may be especially true of large lending companies who may have their staff working from home. This may also mean you need to sign and send documents online using a secure document transfer system. Your agent or lender will be well-versed in how these programs work and should be able to walk you through the process if you’ve never used one before.
2021 Housing Market Trends
Here are a few of the expected 2021 housing market trends to keep your eye on:
Suburbs Stay Hot
The pandemic pushed many buyers to seek out more space for themselves and their families. This led to increased interest in suburban homes that typically offer more square footage on larger lots. This trend is expected to continue in 2021, so be ready for more competition if you are looking to buy in these areas.
New Home Construction Takes Off
After basically grinding to a halt at the outset of the pandemic, new home construction had a major resurgence in the fall of 2020. This means there will be an influx of new homes available during the spring and summer buying seasons. Over the past few years, there has been more demand for housing than supply. So, you can still expect significant competition for these homes, but the new construction boom should ease this pain some.
Impact of Evictions
When the pandemic hit, the CDC put a moratorium on evictions, hoping to help people unable to make rent. But that moratorium is only proposed to be extended to January, 2021, meaning millions of people could soon be evicted from their rental properties. If landlords are unable to find new renters quickly, they may be more likely to put homes on the market. This would lead to an influx of new available properties. It remains to be seen exactly what effect the expected wave of evictions will have on the housing market, but it is something to pay attention to nonetheless.
Do Your Research
When you look at the 2021 housing market forecast, it may appear at first glance to be a bad time for buyers. But sale price is only one of the many factors to consider when looking to buy a home. In truth, the deal you get will be more about your individual circumstances and the specific property you want to buy than the larger housing market itself. Home buying in 2021 will certainly have some advantages and disadvantages. But, by doing your homework and working with an experienced agent you trust, you can get a great deal and find the home of your dreams.
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