Real Estate predictions are often guided by the previous year and 2020 was certainly one for the books. As the new decade began, we were full of hope. The year started off bright with a successful housing market and economy, however, plans were changed by March due to the global pandemic and economic recession.
The economy has begun to turn around in the past few months and the housing market continues to succeed in record numbers. As we begin the new year, we wanted to take a look at our real estate predictions that we believe will not only shape this year but years to come.
Predictability and Patterns
In 2020, the typical seasonality of home sales was thrown out the window due to the timing of the COVID-19 pandemic. Spring is typically the best time of the year for sellers to list their home but with quarantines in place, sellers were hesitant to place their home on the market. This resulted in a lack of inventory for buyers. The housing market sales were pushed to decade highs as time on the market was at record lows. This trend continued well into the fall when the market typically flops and favors buyers over sellers. While 2020 was a rollercoaster, we believe that in 2021 there will be a more set pattern in place.
Most Home Sales Since 1983
Despite the unpredictability and halt to typical seasonality, 2020 was an unbelievably strong year for the housing market. In 2019, it was predicted that home sales would grow about 6% into 2020. However, in 2021 we believe that the growth percentage will go well into the teens and possibly even 20%. If home sales skyrocket above 21%, this would be the biggest single-year gain in sales since 1983.
As 2021 continues, we predict real estate sales will continue to rise.
As we learned in economics class, supply and demand go hand in hand. In 2020 there was an increase in demand for homes with limited homes for sales which caused an increase in prices. Between the end of 2019 to the end of 2020, home prices were up about 12%. In 2021, we could see these percentages put at ease, especially as life returns to somewhat normal. As the pandemic dwindles due to increased vaccinations, it is predicted that more homes will come onto the market which could ease price growth. In 2021, we predict that home prices will rise between 2.1%-5% which is still lower than the 12% we saw in 2020.
Low Mortgage Rates
In conjunction with home sales and prices, comes mortgage rates. The pandemic certainly helped with mortgage rates in 2020 as they fell to a record low. Since they currently sit about 3%, we believe that this will continue into 2021. Similar to home sales and prices, we will mostly see the lowest rates at the beginning of the year but may see a slight increase in the fall and winter.
By building a home from the ground up, homeowners are customizing the space to fit their lifestyle.
New Home Construction
With remote work not going away anytime soon, people are using their homes more and looking for ways to customize the space to meet their needs. Demand for new home construction is already in demand and we predict that it will rise in 2021. From bigger homes and distinct spaces (goodbye open floor plans) to health-related and energy-efficient amenities, the list of demands that new homes are being built to meet is becoming increasingly more desirable. Homebuyers are looking for ways to cut costs in any way they can so building a home to fit their needs is becoming a popular option.
Here’s to the Year Ahead
It may be a new year, but the real estate market is still strong. 2020 was full of unpredictability but 2021 is shaping up to be another strong year.