Home prices look like they will continue to rise in 2021 according to realtor.com, but at a slower, more normal pace than they did in 2020. However, interest rates are slated to rise, as well, creating challenges for first-time buyers.
This makes the earlier part of the year better for most buyers if they can act quickly. In fact, fast sales will continue to be the norm, but perhaps not as quick as 2020. Those purchasing homes for the first time often can’t compete with home-buying veterans who are already comfortable with the shopping and borrowing process.
Inventory should also increase, which does give buyers a bit of power back, but 2021 will most likely be a seller’s market until the end. In fact, the number of buyers will most likely be higher than the number of homes available for the duration of the year.
However, all of this hinges upon COVID-19 and the financial impact of shutdowns, working from home, and other industries’ abilities to bounce back.
As large cities shut down, many fled to the suburbs in search of larger homes with office space. Remote working pushed many people out of big cities, and if that trend continues, suburban demand will increase even more. But if more shutdowns are on the horizon, the market could stall and put even more pressure on buyers.
Would-be buyers may also disappear from the market if a double-dip recession comes into play. This could actually decrease home prices in the long term.
Whatever happens, millennials will be calling the shots with Gen-Z on their heels. Older millennials are at the time in their lives to sell their first homes and buy something bigger and better, while younger millennials are ready for their first home purchases. But Gen-Z is entering their home-buying years and will start shopping for their first houses, as well.
While low mortgage rates were enticing in 2020, the lack of inventory and strong demand actually decreased affordability across the country, virtually erasing any financial benefits of historically low rates. Buyers are encouraged to act quickly and even shop earlier in the year if they want to get the most out of their investment, because prices and mortgage rates should continue to increase, keeping overall affordability low.
All in all, 2021 is forecasted to be a good year to sell, pending the pandemic can get put in check and the economy can recover. Regardless, it should be more steady and predictable than 2020.