Where Is the Housing Market Headed in 2021? Top 10 Predictions From an Economic Expert
Even if you had a crystal ball, a pair of ruby-red slippers to click together, and a direct line to the other side...I don't think anyone could have predicted the many trials and tribulations 2020 brought along with it: a global pandemic, national shutdowns, ranging wildfires, necessary social change, killer bees or wasps (I'm not entirely sure), and so much more. 2020 was undoubtedly the hardest year many Americans have ever faced.
However, with a Covid-19 vaccine officially being administered and another round of government financial aid, many experts believe the housing market will only grow stronger in 2021. How we move forward as a nation and how long the fall out from Covid-19 will last remains to be unseen, but here is one expert's opinion of how the housing market will fair this year...
Ten predictions from Redfin's chief economist, Daryl Fairweather.
Prediction #1: Mortgage rates will remain historically low at 3%.
Thirty-year-fixed rates may tick up over the next 12 months, but if so, it will happen slowly and insignificantly. It won’t be enough to put off buyers, although it might impact their willingness to pay a premium to land property.
“Mortgage rates will remain low primarily due to a sluggish global economic recovery,” Fairweather explains.
Prediction #2: There will be more home sales than in any year since 2006, but price growth will slow.
New listings declined in 2020 compared to the previous year—particularly in coronavirus hotspots. But “as COVID-19 cases hopefully decline due to vaccination, Redfin expects more new listings to make for a more balanced market and more home sales.”
Prediction #3: There will be more new homes built than in any year since 2006.
Low interest rates have incentivized homebuilders to borrow for construction projects, and commercial builders have largely sat out 2020, making it easier to meet labor, material, and land demands for new homes.
Prediction #4: The number of Americans relocating will be the highest it has been in 16 years, which will help the economies of affordable places like Buffalo, Cleveland, and Pittsburgh.
With social distancing measures, remote work, homeschooling, and more, many settled into a new lifestyle in 2020—away from the hustle and bustle of once-thriving city centers and the high costs of living that came with living nearby.
“In 2021, the number of Americans moving across county lines will surpass 14.5 million,” Fairweather predicts. “The last time there was this much cross-county migration was 2004, when 15.3 million Americans moved counties.”
Prediction #5: The homeownership rate will reach 70% for the first time since 2005.
Work-from-home employees are ditching expensive rentals for affordable homes in the suburbs. The trickle-down effect could make it harder for small-time landlords to profit on urban investments.
“This surge in condos for sale, which currently sell for a 17% discount relative to single-family homes, will give many city-dwellers the opportunity to become first-time homebuyers, as well.”
Prediction #6: San Antonio, Tucson, and Tampa will be the hottest housing markets as major southern cities like Austin, Phoenix, and Miami become unaffordable.
Coastal dwellers have long been ditching overpriced areas for other warm climates with more reasonable housing options—so much so, hip cities like Austin, Phoenix, and Miami no longer seem like much of a bargain.
Prediction #7: Expensive cities will invest in their culture and lifestyle to attract residents and tourists.
As residents flee expensive cities for reprieve from inflated real estate prices, places like San Francisco and New York will inevitably take a hit—especially when it comes to tax revenue. However, “these cities won’t die just because office workers leave, but these cities will have to be reborn with a greater emphasis on culture and lifestyle to attract residents and tourists,” Fairweather says.
Prediction #8: Most homebuyers will make an offer on a home sight unseen.
With currently heated markets poised to light up even more, the fact is homebuyers will have no choice but to rely on virtual tours. This is especially true depending on how long the pandemic lingers and how comfortable society becomes with all-virtual everything.
Prediction #9: 2021 will usher in a new era of price competition for real estate agents.
"In 2021, all listings will show the buyers' agent fee as a consequence of a settlement between the Department of Justice and the National Association of Realtors," the forecast notes. Fee transparency will offer both buyers and sellers a leg up when it comes to negotiating commissions.
Prediction #10: Everything associated with buying or selling a home will be offered at one-stop-shops.
With Wall Street pumping billions in capital into home buying and selling tech, "the competitive battle in the industry will heat up, as the biggest real estate companies work to become a one-stop shop for customers, integrating home trade-in and cash offers, concierge listing prep, mortgage, title, insurance, home warranty, and moving services."