Curious where the market will head this year? Here are the trends to look out for!
It’s that time of year again. Here are our top 10 predictions for real estate in 2021.
- Rates may decrease further – Although you’ve heard about historic lows last year, the same is likely to continue in the year ahead. According to Freddie Mac1, the National Association of REALTORS (NAR), and other reputable sources, rates for a 30-year mortgage are forecasted to be slightly lower this year.2
- Home prices and sales expected to increase – Another forecast from Freddie Mac, the NAR, and so on, expects the price of existing homes to increase. However, one potential downside to this is that first-time homebuyers may be put at a disadvantage when looking for options within their budget. Overall, more than six million homes are expected to be sold in 2021. Put another way, Fannie Mae estimates purchases and refinancing to reach a combined $3.47 trillion in volume. 3
- Suburban vs. big city living – Due to the pandemic, many people set their sights on the suburbs in the pursuit of more “socially distanced” living conditions. However, there’s an anticipated shift back to city living as vaccines become more widely available (combined with the hope that local economies and job markets will begin to flourish once again.)4
- Buyer stats and needs – With millennials making up the largest generation to date, not surprisingly, they will continue to make up the majority of the housing market. With older millennials’ first home purchases providing them with additional equity, coupled with the need for extra space for work-from-home and raising children, many will begin to trade-up. Generation Z (ages 24 and younger) will also start new household formations.5
- Pandemic expectations vs. real estate – According to Mike Fratantoni, Chief Economist for the Mortgage Bankers Association, “As long as the spread of the pandemic is brought under control, the economy should expand around 3% next year, allowing the job market to improve, incomes to rise, and home sales to meaningfully increase.6
- Digital experience on the rise – Although a new year is on the horizon, it’s no secret the pandemic will be a factor in real estate and the economy as a whole. That being said, digital alternatives (such as 3-dimension virtual home tours, videoconferencing, digital documents, transaction management, online loan applications) and so on will continue to be the consumer expectation.7
- Increase in construction – Even now, building permits were up 21% at the tail end of 2020 (from September through November). With this momentum going into 2021, more homes are expected to be built than any other year, all the way back to 2006! Simply put, less competition with office builders has made land, materials, and labor costs more affordable. And naturally, those historic rates already mentioned have made borrowing for projects a lot easier to manage.8
- Realtor.com’s© Top 10 Housing Markets – For 2021, the hot housing markets are basically small towns that are growing up and big cities getting wider: 1. Sacramento—Roseville—Arden-Arcade, CA; 2. San Jose-Sunnyvale-Santa Clara, CA; 3. Charlotte-Concord-Gastonia, N.C.-S.C.; 4. Boise City, ID; 5. Seattle-Tacoma-Bellevue, WA; 6. Phoenix-Mesa-Scottsdale, AZ; 7. Harrisburg-Carlisle, PA; 8. Oxnard-Thousand Oaks-Ventura, CA; 9. Denver-Aurora-Lakewood, CO; 10. Riverside-San Bernardino-Ontario, CA.9
- Increase in relocation – More than 14.5 million Americans are expected to relocate in 2021, the highest figure in nearly two decades. One of the key factors in this remote working being heavily adopted and likely becoming part of our post-pandemic “new normal.” No longer being tethered to one location means many professionals and families will be looking to put down new roots in more affordable areas.10
- Market crash? Unlikely. – This is one of the predictions we also made last year. Although there has been a fair share of uncertainties when it comes to the economy, as we’ve already seen, real estate has been insulated against that. On top of the low rates already mentioned, and despite the predicted increase in building, inventory is still too low to meet all the demand at this time. Also, despite the unfortunate loss of countless jobs, many of them were in low-wage job sectors such as hospitality. In other words, those who have found themselves searching for work were renters and not actively on the market for a home. 11
In conclusion, the market is stable and there is plenty of momentum going into 2021, despite an otherwise lackluster year. Buyers, builders, sellers, and agents all have plenty to be optimistic about!
Make sure you start the year off right by working with a professional who can craft a mortgage solution that works for you this year. Contact a Loan Advisor to get started.
This is not a commitment to lend. Programs available to qualified borrowers. Subject to credit approval, underwriting approval and lender terms and conditions. Program terms available may be based on the state or county in which the financed property is located. Programs subject to change without notice. Additional restrictions may apply. Flagstar Bank, Equal Housing Lender, Member FDIC. Visit www.flagstar.com for additional disclosures.
Flagstar Bank, Member FDIC, uses all reasonable efforts to ensure that this information is current, accurate and complete on the date of publication, no representations or warranties are made (express or implied) as to the reliability, accuracy or completeness of such information. Flagstar Bank, Member FDIC, an Equal Housing Lender, therefore, cannot be held liable for any loss arising or indirectly from the use of, or any action taken in reliance on, any information appearing in this.