Real Estate Marketing
February 14, 2021

Real Estate Trends of 2021

Christie M
About Author


The COVID-19 pandemic affected the global economy in a way that was completely unprecedented. The US economy also saw its biggest hit since the Great Depression in the second quarter. The housing market surprisingly rose over the difficult spell in record time and came out with flying colors.

The residential housing sector pulled up the US economy and stood tall as a pillar of support in the trialing times. But now the most awaited question in the minds of almost every realtor is will it pull through 2021 too?

In a recent article by Inman, the Chief Economist of Windermere, Matthew Gardner took a moment to spell out the trends in real estate for the New Year. 

There’s an overwhelming amount of data and headlines circulating. This column is my attempt to make sense of it all for you, the real estate professional, from an overall economic standpoint.” He says as he goes on to give his 2021 forecast for US Housing. 

Gardner expects to see an overall positive outcome from 2021. While the Covid-19 pandemic threw an unexpected curveball to the year that was 2020, turns out the latter half of the year was rather fruitful and productive for the real estate market.

MORTGAGE

The biggest blessing of 2020 that instigated the boom in the market was the significantly low mortgage rates that according to statistics, we haven’t seen since 2006. The low rates propelled sales causing a recovery that was incredibly quick that no-one really saw coming. 

In his article, Gardner predicts only a slight rise in mortgage rates, that is, from 2.83% to the 3.08% which is the peak in 2021. The rates will rise gradually and not very significant to pull down sales. 

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In an article with Forbes, the Chief Economist of the National Association of Realtors, Lawrence Yun said, “Home sales surprised with a surge in the second half of 2020 and the momentum will carry into 2021. The record low mortgage rates have been the key factor for home buying even in a difficult job market condition.” 

He believes that with vaccine distribution right around the corner causing the jobs to stabilize and a clear indication from the Federal Reserve that rates aren’t going to raise much, the supply of housing will also see an increase. Thus providing more options to consumers and importantly stabilizing the prices.

A general consensus amongst economists and real estate experts across the board is that even though the rates will see a rise, the impact will be close to minimum and demand will continue to grow as the year progresses. 

However, this majorly depends on the COVID-19 vaccine distribution and the corresponding pick up in the economy as well the interest rates not seeing any sudden rise.

HOME SALES

The next subject Mr. Gardner pursues is home sales, “My forecast is for sales this year to have risen by 3.9 percent, but sales in 2021 should be up by 6.9 percent, and that’s a level we haven’t seen since 2006.”

However to see such a hike in sales, we need more inventory. The number of existing homes that enter the market should increase. This is certainly possible with the current work from home trend set by the pandemic. 

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A majority of the population has taken to working from home indefinitely and no longer sees a need to live close to their workplace. Some people choose to move as their homes are not equipped for remote working. 

While this may play a role in increasing the number of properties in the market, the idea of it being the only factor is overly exaggerated. According to Gardner, he says that even though people will choose to move out of their homes they will not move too far.

In a similar context, Mr. Joe Tyrell, President of ICE Mortgage Technology says, “We will likely see borrowers invest more in their houses and choose home locations in places that fit their lifestyles, versus the need to be close to offices or particular schools.”

However, Robert Diaz, Chief Economist and Senior Vice President of National Association of Home Builders believes, “Residential construction continues to face limiting factors, including higher costs and longer delivery times for building materials, an ongoing labor skills shortage, and concerns over regulatory cost burdens.”

He expects 2021 to be the year for the supply side to recover and move ahead from the hit it took in 2020 but it may be slow especially in high demand areas. 

NEW HOME SALES

New home sales were definitely the blessing that nobody saw coming. The unexpected surge in demand as well as the rates was just right to kick-start the market and pushed builders to start construction of new properties. 

Matthew Gardner’s forecast, “For single-family housing starts shows them rising by 8 percent in 2020, but in 2021 I see starts up by a very significant 16.4 percent.”

These predictions show a promising future for the market in the year 2021. The construction of new properties will help bring a necessary balance to the supply side of the scale and further maintain any steep rise in pricing. 

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This will further push sales up by 18.7 percent in the New Year, once again levels that haven’t been seen since 2006. The only major concern we noticed, across many realtors is that of cost. 

The pandemic has completely broken down budgets of almost all the builders. While premier properties are what they want to build, it is difficult to restrict your costs and overheads to sell the property at an affordable price considering the market. 

However, with most buyers moving away from city centric areas to places further away, builders can find land which is much cheaper thus reducing their costs and finding enough demand. It’s safe to say that the construction market can definitely see an upside. 

WILL THE HOUSING MARKET CRASH IN 2021?

There’s a new whisper amongst crowds about an expected crash of the market in the New Year, well we bring good news when we say this is far from true. In fact the curves all seem to be going up in 2021. Experts say we can continue to expect the housing market to be the supporting force for the economy in 2021.

With the economy opening up, the mortgage rates staying steady and a definite increase in the number of available jobs, first time buyers are definitely being encouraged to enter the market. Though, with the supply not backing the demand, price rates still seem to be higher than it should be. 

According to the Fannie Mae Economic and Strategic Research (ESR) Group, “Historically, low-interest rates are also an inducement to buy homes, but slow supply growth continues to result in high levels of home price appreciation, which is offsetting some of the affordability benefits of the lower rate environment.”

It’s important to also remember that there is still a change in consumer behaviour that is affecting the buying/selling trend, caused by the COVID-19 pandemic. However, the Federal Reserve’s decision to not raise interest rates anytime soon, buyers are sure to be taking the opportunity to refinance their existing mortgages. 

 According to Mr. Gardner, he says that while foreclosures will rise with forbearance terms come to an end, the effect on the market will not be so dramatic, as a complete crash. This is because he expects the numbers to be mild compared to that of in 2008 and 2010.

So it’s safe to say that most experts believe that the market will surely not crash and actually pull through. And overall, the housing sector seems to be continuing on its upward curve in 2021. 


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