In 2020 the housing market experienced a major pandemic-driven boom, with low-interest rates and high demand for housing. Experts predict that this demand will continue through the next year, as those who could not afford a home in 2020 are saving up for 2021. According to the National Association of Realtors, “Existing home sales increased 9.4% in September, surpassing expectations, and the median purchase price rose nearly 15% year over year.”
Glenn Kelman, CEO of Redfin, does see an upward trend in the housing market for 2021 but does not expect it to last forever. “This level of demand is absolutely insane. I would expect it to last into 2021, at least,” Glenn Kelman said, according to an interview with CNBC. “There are so many people now who have decided they’re not going to be able to buy a home by year-end, who expect to do so going into 2021, especially as their kids shift school districts. I do think we’re going to see this for some time.”
We can attribute this drive for housing to the professionals who have not been affected by the pandemic. Working remotely has given them the opportunity to move out of busier and more expensive metropolitan areas to distant suburbs or vacation homes, which eventually become permanent homes.
As this year comes to a close, we look at some of the factors that will impact the housing market, and what potential homeowners should expect when house-hunting next year.
Experts in the industry state that mortgage rates will stay in the low 3% range over the next year. The Mortgage Bankers Association believes the year will start with a 3.1% rate for a 30-year loan, while Fannie Mae predicts it may be as low as 2/8%, with a 3% rate across the entire year.
Property prices will continue to escalate through next year, but at a slower rate than in previous years. MBA projects a 2.4% increase in prices, which is considerably lower than last year’s 5.1%. If prices do rise, lower interest rates will help decrease the overall cost, though it might mean buying a smaller home or having to pay a higher mortgage.
This year’s house market presented a high demand for property and a low surplus. 2021 is expected to offer more housing options as new construction properties will be hitting the market. Fannie Mae and MBA predict more single-family construction than ever before in the last two years.