With the U.S. homeownership rate set to reach 65 percent, the ultimate American dream of owning a home is now a reality for more Americans than ever before. The last time such a large percentage of people owned homes in the country was before the mortgage and bank crisis.
The good news comes after a year that had mixed outcomes in the housing market due to the coronavirus pandemic. At the start of the pandemic, there was generally low activity in low sales, aside from some urban homeowners fleeing towards the suburbs and rural regions for more space. The remainder of the year witnessed just the opposite in housing market trends, with homebuyer activity vastly outweighing the available home inventory throughout the country.
So, how will this year's housing market trends look like? Should we expect largely similar homeowners’ market trends to the ones we saw in the past year, or will the promise of widespread access to coronavirus vaccines yield changes in the housing market? In this comprehensive guide, we’ve compiled a list of four hot housing market trends to look out for this year. We’ll discuss what each of these trends means for both home buyers and sellers. Read on to learn more about housing market trends today.
Home Inventory To Remain Low
Towards the end of last year, home inventory was incredibly low compared to the same time the previous year. There simply weren’t enough homes in the market to meet buyer demand. The same will continue throughout this year and most likely spur a new wave of home construction.
What Low Home Inventory Means for Buyers
If you’re planning to buy a home this year, stay alert during the house-hunting process. Chances are the best homes will be snatched up very quickly. The vast majority of homes sold towards the end of last year spent less than a month in the market.
In such a market, you won’t have time to mull over whether to buy a home for too long. To improve your success in getting a good home, do the following:
Sacrifice a Few Wants
Be willing to give up some nice wants for what you really need. Consider looking for the least expensive house in a great neighborhood and upgrade your home over time.
Expand Your Home Search
If the location you’d like to buy is extremely competitive, consider expanding your search to other areas. Some homeowners have found real gems in less popular neighborhoods.
Get Pre-Approved Early Enough
Don’t go home hunting in any market before being pre-approved for a home loan, especially with home inventory too low. If you don’t have enough down payment to put down for the mortgage already saved up, apply for a down payment assistance grant early enough. Being pre-approved shows sellers that you’re serious about the purchase and gives you an edge over buyers who aren’t.
Mortgage pre-approvals will also save you time when you find the home you want to buy. If you aren't pre-approved, you could also miss out on a house purchase because other buyers are more prepared to purchase the property.
What Low Inventory Means for Sellers
Low home inventory is great news for sellers. It means there’s low selling competition, so you can expect offer letters to flood your mailbox the moment you list your home. You take the time picking the offer you like most and move at a pace that suits you best. Just keep in mind that if your home sale price is higher, the new house you will end up moving into will often cost more too.
Home Prices Will Continue to Rise
For almost a decade, home prices have grown year-over-year. The gain in home price was even greater last year, and you can expect the same this year.
What Higher Home Prices Mean for Home Buyers
If you intend to buy a home this year, you’ll need to consider your budget carefully. How much home can you realistically afford in an expensive market like the current one? Regardless of the amount of pressure you feel seeing other buyers pluck nice homes off the market, stay within your budget.
What Higher Home Prices Mean for Sellers
For sellers, the market promises a handsome profit. This is good news, given that you’ll need that extra money if you need to buy a new home. Consider hiring a seasoned real estate agent who’s familiar with your local market to maximize your profit.
Don’t jump at the first offer you get. If you’re in no rush to move, patiently wait for an offer that gives you the nicest possible profit.
Mortgage Interests Rates Will Still Remain Low
In recent years, interest rates have been low. At the end of last year, the 30-year fixed mortgage rate was 2.87 percent. This year, you expect the rates to hover around 3 or 3.5 percent this year, which is still quite low.
What Lower Interest Rates Mean for Home Buyers
Low-interest rates are great if you’ve been thinking of getting a mortgage this year. It means your mortgage is going to be more affordable.
That being said, be careful that the low interest rates don’t pressure you into getting a huge mortgage for a house that you can’t afford.
This is also a great chance to refinance your current mortgage to enjoy lower interest rates.
What Low Rates Mean for Home Sellers
When interest rates are low, it’s good news for home sellers. That’s because home buyers are generally more motivated to apply for mortgages, meaning you’ll have buyers lining up to buy your property once you list it. For home sellers not planning to move anytime soon, now may be the perfect time to refinance your mortgage.
Online Real Estate Services Continue To Increase
Over the years, home sellers and buyers have been able to list or browse homes for sale on the website at the click of a button. Recently, a bevy of online services has come up that offer to sell or buy homes quickly. Expect these online real estate services to grow in popularity in the coming years.
Among the most prominent real estate online services at the moment are third party buyers. These services offer to buy the home from you and sell it at a higher price. Think of the "We Buy Ugly Houses" people as an example. While the process is remarkably hassle-free, it often means less profit for you.
Other online real estate services you can expect to hear more of include virtual agents who handle everything a traditional agent does. The only difference is that they do their business online and charge a fraction of the cost. Online real estate agents, Realtors, and property brokers usually charge a lower realty fee, sometimes half the amount!
Now You Know What Housing Market Trends to Expect This Year
Housing market trends are always changing, sometimes slightly and sometimes massively. Keeping up with these trends helps you stay ready for what lays ahead in today’s busy real estate world, whether you’re planning to sell your home or buy one in the coming year.
Are you interested in reading more content on real estate and home ownership? Visit the Real Estate section of the Bootstrap Business Blog to learn more about the housing market, home improvement, property management, and land investments.
