The 2020 housing market was full of surprises. Despite a health pandemic impacting nearly all segments of everyday life, real estate was resilient. Realtor.comÂ® recently released its 2021 housing forecast, predicting that inventory will make a slow and steady comeback, providing buyers with much-needed relief. However, increasing interest rates and prices will continue to pose a challenge on affordability throughout the year.
Here’s the forecast breakdown for 2021:
Mortgage Rates: Up to 3.4 percent by year-end
Existing-Home Median Price Appreciation: +5.7 percent
Existing-Home Sales: +7.0 percent
Single-Family Home Housing Starts: +9 percent
Homeownership Rate: 65.9 percent
These are the key housing trends, according to realtor.comÂ®:
– Millennials continue to drive the market while Gen-Z become market players
– Affordability becomes growing obstacle
– Inventory starts slow road to recovery
– Suburbs to shine if remote work stays around
There are a couple of elements that could impact these forecast trends, however. According to the report, if COVID-19 continues to bring lockdowns and quarantines, that could “put a dent in housing inventory and sales, slowing the market and putting increased pressure on buyers.” But if a vaccine is rolled out quickly, home sales, prices and inventory could be stronger than predicted. Additionally, there’s a chance of a double dip recession, according to the report, which could lead to less consumer spending and more broad impacts to businesses and economic growth.
“The 2021 housing market will be much more ‘normal’ than the wild swings we saw in 2020. Buyers may finally have a better selection of homes to choose from later in the year, but will face a renewed challenge of affordability as prices stay high and mortgage rates rise,” said realtor.comÂ® Chief Economist Danielle Hale. “With less cash and no home equity, millennial and Gen Z first-time buyers will be impacted the most by rising home prices and interest rates. While waiting until the fall or winter months of 2021 may mean more home options to choose from, buyers who can find a home to buy earlier in the year will likely see lower prices and mortgage rates.”