When the clock struck midnight on January 1, 2021, people felt like shouting from the rooftops because they survived 2020. It was a miserable year for many, as the pandemic, political strife, financial strain, and economic losses took their toll.
The real estate market was something else in 2020. The market completely fell flat in March and April but bounced back to the point where many locations are doing great. For example, home sales in New Jersey were up 34% in October 2020 compared to October 2019, and those trends are similar throughout the United States.
What will the real estate market do this year? Check out these real estate market predictions to see what the market looks like in 2021 and beyond.
1. A Major Shift from Cities
Buyers’ needs changed over the last year. Many people were happy to live in expensive cities, walk or take the subway to work, and come home to a tiny apartment they could barely afford.
Thanks to remote work, that’s all changed. Buyers realized that they can keep their job and have a much better quality of life.
Suburban areas about an hour from major cities are seeing the impacts of the change. Buyers can purchase a home with more space, a yard, and a lower cost of living while earning the same.
2. Affordability Remains A Problem
It’s more expensive to buy a home than ever before. The median sales price in the U.S. last year was $320,000. Buyers have to have more for a down payment and be able to pay the mortgage.
The people who already own or rent a home are feeling the effects of higher home prices, too.
People flocked to cities like Portland and Austin because of the low cost of living and high quality of life. When everyone flocked there, housing prices skyrocketed.
That forced many people to the streets. Both cities are facing a houselessness crisis that needs to be addressed. This is going to happen in other cities that are seeking an influx of people.
3. Interest Rates Remain Low
There is some good news for buyers in a tight market. Interest rates remain low and are unlikely to change for most of the year.
That can help ease the burden of the affordability problem, but it’s not the end-all solution. You don’t want to jump into buying a home just because the interest rates are low.
As you’ll learn shortly, there are some other ways to buy a home that is more affordable.
4. It’s A Seller’s Market
Talk to a real estate agent and you’ll hear one common refrain: Inventory is low. It’s a seller’s market, that’s for sure.
If you’ve been thinking about selling, now is the time to do it. Home prices are up, and demand is high in many areas. The only challenge you may have is finding a new home.
5. Agents Continue To Adapt
Real estate agents are known for thinking on their feet. They had to adapt the whole way they work.
Much of the real estate sales process went online and homes are sold through virtual showings.
The entire real estate industry continues to adapt and use technologies to make work faster and efficient. Companies are using technology for a real estate title search, home tours, and customer management.
6. More Buyers Are Looking At Alternatives
Buyers are looking at ways to make homebuying more affordable. A couple of unconventional methods to buy a home are gaining traction.
This may not be a good thing overall in the housing market.
For instance, programs that offer loans to cover the down payment are increasing. This isn’t a good thing for buyers. Instead, leverage grant and FHA loan programs, which help you save up for a deposit.
Another program that buyers are using is a rent-to-own scheme. This is where you pay rent for a set time period and have the opportunity to own the home. These programs can put you in a bad financial position if you sign a bad deal.
7. Prices Will Come Back To Earth
Many buyers and sellers are trying to wait out the pandemic before buying or selling a home. Trying to move and go through closing in the middle of a pandemic is just too much for many people.
What you’ll see down the road is that the real estate market will level out. Right now, homes are overvalued in many cities. Nationally, homes are overvalued by as much as 5.5% across the country.
In Las Vegas, homes are overvalued by 28%. In Idaho, that number is even higher, edging closer to 35%.
What does that mean for you? Prices will come down. You’re better off waiting for this to happen than jumping into a deal just because interest rates are low.
Right now, the inflated prices are due to limited inventory and rising demand as people flee California and other populated areas.
8. Commercial Space Will Shift
Do you have any commercial real estate investments? You’re going to see major impacts on the commercial real estate market in 2021.
Restaurants and retailers had to operate at limited capacity over the last year. Many of these businesses took advantage of federal loan programs, but they still need more help to get through the winter. Without that help, many of these businesses will close.
Businesses will likely need less space as more workers shift to remote work.
That will turn into an increase in commercial vacancies. The only thing that can turn that property problem around right now is a rising demand from the medical industry.
Get Your Crystal Ball: Real Estate Market Predictions 2021
What does the real estate market look like in 2021? Thanks to COVID-19, there are a lot of major shifts happening in real estate.
As these real estate market predictions show, inventory remains low, buyer demand in the suburbs is up, and affordability will be a big issue this year.
Check out the Home Improvement section of this site in the Real Estate tab for more tips to improve your home. The housing market is red hot, so make sure you can keep up with the top new trends!
