Despite the pandemic’s impact on the economy, the housing market didn’t hit rock-bottom. Mortgage rates dropped, buyer demand increased, and home prices surged. In September, home prices in the U.S. reached a six-year high, hitting 6.7%. The prices jumped even higher in some states, specifically Idaho and Maine, peaking at 12% and 11%, respectively.
In Australia, on the other hand, home prices declined to 2.1% between April and September. But industry experts from both the U.S. and Australia see a promising future in real estate. Hence, if you’ve found the perfect piece of land for sale to build your house on, closing a deal might be your best decision in 2021.
Prices Will Keep Rising
Freddie Mac and the Mortgage Bankers Association (MBA) predict that home prices will rise within a 2% range next year. This is a relatively slower growth compared to what’s occurred recently. Experts at CoreLogic share this insight too, but in their prediction, appreciation will even be slower. According to their latest Home Price Index, the rate of growth will be just at 0.2% by September 2021.
For those who plan to get a mortgage next year, you’ll probably enjoy a more favorable situation. The MBA’s weekly survey shows a slowdown in the activity; in fact, there has been a 5% decrease in loan applications recently. If this trend continues, the growth of home prices could slow down even further.
A price increase is also expected in Australia, where CoreLogic just recorded a 0.8% appreciation in home values this month. According to Tim Lawless, CoreLogic’s head of research, Australia’s national home value index may just surpass pre-COVID levels next year, as long as the growth trend continues.
Realtor.com predicts a price growth as well, albeit higher than CoreLogic’s, Freddie Mac’s, and MBA’s. In the infographic posted on their website, it is stated that home prices will “hit new heights” at 5.7%, and seasonality will make a return, as spring and summer will see a wave of home-buyers again.
They’ve also predicted a rise in home sales (7%), a 3.4% increase in mortgage rates, and more millennials entering the housing market.
Fannie Mae, meanwhile, sees home construction booming in 2021. The company predicts a 17.1% growth in single-family home constructions next year, so indeed, it’s a good time to buy land and start building your home dream home in 2021.
Demand For Homes Will Rise
Redfin CEO Glenn Kelman is positive that there will be an “absolutely insane” demand for housing in 2021, a trend that started this year. However, because people have now decided that it’s impossible for them to purchase a house by year-end, we can expect that they’ll carry out their plans next year.
Kelman thinks that the demand for housing is primarily driven by wealthy professionals who can afford to work remotely. Their financial standing has given them an option to move out of urban areas and relocate to the distant suburbs, or to buy a vacation home. Kelman added that the economic impact of the pandemic made this even more attainable for the rich.
The housing boom split the economy into two: rich people being able to access capital almost for free, and the struggling people who got laid off their jobs and are unable to meet the heightened credit standards. As a result, the rich who only got richer will use their money to buy a new home. They may even choose to live in a vacation home for good since they can always work remotely.
On the supply side, you may see a surge at present, because the U.S. presidential elections decreased the market uncertainty. Sellers have a lower risk tolerance than potential buyers since the process of selling a home can take months. On the other hand, when buyers find the perfect home, they tend to negotiate immediately to be able to buy it for a better price.
As such, a lot of sellers may decide to list their properties by January or February next year. After all, it’s easier to sell when buyers aren’t anxious about the economy anymore.
Mortgage Rates Will be Lower
While mortgage rates aren’t likely to hit record lows again, they will remain low in 2021. All industry experts from MBA, Freddie Mac, and Fannie Mae are confident about it. Each of them foresees that 30-year fixed-rate mortgages will stay between the peaks of 2% and at the bottom of 3% next year.
The predictions may be favorable, but still, don’t forget to do your research before buying a home in 2021. After all, there had also been great forecasts for real estate before 2020 came, but look where it actually took us. Hence, keep your eyes peeled for the news, but don’t waste too much time waiting.