While 2021’s housing market promises the same positive momentum as last year, buyers have questions about COVID-19’s continuing effect. Take a look at these signals showing us what’s ahead:
- The housing market will be directly affected by how long the COVID-19 pandemic lasts. Questions linger on whether another recession is ahead or another surge of buyers seen last year continues, states a report by Attom Data Solutions. The good news is, mortgage and real estate professionals have the technology and protocol to make listings, viewings, transactions and escrows convenient. Last year already put the industry through the ringer, and the industry immediately met the challenge head-on. So 2021 isn’t a question of adaptation, but about when society can go back to normal — and baseline estimates are hoping for autumn.
- Be on the lookout for nice upgrades in existing homes for sale. Some of them will have impressive new amenities and remodeling features. Why? The National Association of Home Builders (NAHB) has said businesses and workers in the residential remodeling industry remain very confident this year will bring plenty of home projects. And that’s on top of 2020’s impressive remodeling projects where “homeowners had more time on their hands to improve and add space and efficiencies,” the NAHB report states.
- Expect more newly developed neighborhoods from homebuilders. Builders have raised production to meet additional demand from those looking for newer and larger homes in less dense neighborhoods, according to a recent article in Mortgage Professional America. While construction is still not meeting demand, the late-2020 upward trend in building new homes has a “promising start” one expert says.
- There may be an uptick in foreclosures for sale, but probably much smaller in comparison to 2008 – 2010. Most of 2020’s mortgage forbearance work-out plans (monthly financial payment relief), as well as moratoriums on foreclosures and evictions, were scheduled to end in early 2021. However, President Joe Biden’s administration “has proposed extending the national moratorium on evictions and foreclosures until the end of September 2021,” according to a recent story published in HousingWire. “If the economy has not sufficiently recovered by this time, it seems that this deadline will be extended.”
- A housing market “crash” seems unlikely. Ample demand for homes is abundant, low mortgage rates persist and an atypical economic recession forced the government to open the financial-relief floodgates. U.S. homeowners have $6 trillion in home equity, with 70 percent of them sitting on 20 percent equity. With home equity booming (Yahoo Finance), a built-in financial stabilizer is providing a huge cushion.
- Mortgage forbearances continue declining — a good sign for a stable market. The total number of U.S. forbearances (monthly financial payment relief) on all mortgages was 5.5 percent in December, lower than the 8 percent peak in May 2020 according to the Mortgage Bankers Association. The more this figure declines, the more stabilization the housing market will experience.
- Another steady-market signal is economic growth, faster job growth and low “average” mortgage rates. Fannie Mae’s experts are forecasting an average U.S. unemployment rate of 5.8 percent in 2021 and 4.1 percent in 2022 (after peaking at 8.1 percent in 2020). What’s more: 2020’s unemployment spike has been skewed toward renters, not homeowners. Also, gross domestic product (GDP) will register 5.3 percent in 2021 and 3.6 percent in 2022 (after plunging -2.7 percent in 2019). And the average mortgage rate will probably end up at 2.9 percent for 2021 (not much higher than 2.7 percent in 2020).
- A larger pool of younger buyers is inundating the market — a positive demographic signal. Half the buyer-battle is knowing who your competition is. Almost 40 percent of home purchases in 2020 were made by Millennials, with the potential for 15 million purchases attributed to this demographic during the next 10 years (according to the National Association of Realtors).