New Year, New Market - Predictions for Real Estate in 2021

 

2020 was a year of unpredictability. However, despite the pandemic and resulting recession, more than 6 million homes were still sold, and home prices grew 5% according to Forbes. 

While the last year has taught us that's impossible to know what may come next, we've gathered experts' predictions for the 2021 real estate market. 

Seasonal Balance 

First, the realtor.com 2021 Housing Forecast predicts that there will be some sense of normalcy returned to the seasonality of real estate. In 2020, the Coronavirus pandemic threw the predictable real estate season out the window. Many stay-at-home orders were imposed right before the summer, the best time for the real estate market. Buyers returned to the market before sellers, and had a drastic impact on inventory, time on the market, and home prices. However, realtor.com predicts that things will begin to settle into the normal seasonal trends in 2021. 

Home Sales and Prices 

2020 changed the way many of us live and work. Because of this, people are continuing to look for different styles of living. Those who can now work remotely are looking to buy homes with more space, and with many millennials and Gen-Z entering the market,  there will be plenty of demand for housing. 

Deputy Chief Economist with CoreLogic, Selma Hepp, told Forbes: "...first-time home buyers will remain a strong force in the market as the largest cohorts of millennials are turning 30 - critical household formation years. But also, the oldest millennials are increasingly contributing to the trade-up market. As a result, 2021 home sales activity is expected to remain strong and outpace 2020 levels."

Danielle Hale, realtor.com chief economist, told Forbes that they expect a 7% growth in home sales, as well as a 5.7% growth to home prices on top of 2020's growth. "While we expect mortgage rates to tick up gradually, sales and price growth will be propelled by still strong demand, a recovering economy, and still low mortgage rates."

Inventory

Inventory has been the biggest struggle the market faced in 2020, as nearly 4 million new homes were never completed, according to realtor.com. Half a million fewer homes were for sale in the beginning of 2020 than the previous year. However, the inventory pace began to pick up toward the end of 2020, a trend that experts think will continue into 2021. 

"With home builder confidence near record highs, we expect continued gains for single-family home construction, albeit at a lower growth rate than in 2019," Robert Deitz, Senior VP and Chief Economist at the National Association of Homebuilders, told Forbes. "... buyer traffic will remain strong given favorable demographics, a shifting geography of housing demand to lower-density markets and historically low interest rates." 

The 2020 Effect 

Last year changed so much about our lives, including how business was conducted in the real estate market. 360 degree home tours, the decline of open houses, and even e-closings, dominated during a time when people were forced to stay home. 

According to Elana Knoller, Better.com's chief product officer, this use of technology will only increase in 2021. "Homeowners and the housing industry at-large will utilize technology even more next year to engage buyers and execute deals," she told Forbes. 

People have also learned a new way of life, which is affecting where and how they want to live. "Many buyers aren't waiting for a return to normal," said Baird & Warners President and CEO Steve Baird to Forbes. "Instead, they're anticipating a new normal in which they live, work, and entertain differently than even before and view housing through that lens." 

Again, if 2020 taught us anything, it's to expect the unexpected. So, buckle in and get ready for what is sure to be an interesting year for real estate!