Amid COVID-19 uncertainty, 2021 will be a robust sellers’ market as home prices hit new highs (+5.7%) and buyer competition remains strong, according to realtor.com’s 2021 housing forecast. Inventory is expected to make a slow but steady comeback, which will give buyers some relief. However, increasing interest rates and prices will make affordability a challenge throughout the year.
“The 2021 housing market will be much more ‘normal’ than the wild swings we saw in 2020. Buyers may finally have a better selection of homes to choose from later in the year, but will face a renewed challenge of affordability as prices stay high and mortgage rates rise,” said realtor.com Chief Economist Danielle Hale. “With less cash and no home equity, millennial and Gen Z first-time buyers will be impacted the most by rising home prices and interest rates. While waiting until the fall or winter months of 2021 may mean more home options to choose from, buyers who can find a home to buy earlier in the year will likely see lower prices and mortgage rates.”
Realtor.com forecasts mortgage rates will continue to hover near 3%, then slowly rise to 3.4% by the end of the year. Home sales are expected to increase 7% and new construction will increase 9% over the previous year. Additionally, the time it takes to sell a home will slow from late 2020’s frenzy, but fast sales will remain in many parts of the country, which will be particularly difficult for first-time buyers learning the ins and outs of homebuying.
Sellers will continue to hold the upper hand throughout 2021 as the number of buyers in the market outweighs the number of homes for sale. Home prices won’t grow as fast as they did in 2020, but steady increases will continue to push home prices to new highs. Sellers can expect their home to sell relatively quickly in 2021, so having their next home lined up will be key. Many sellers are also buyers themselves, so they will struggle with the same issues when it comes to purchasing their next home.
Regionally, the survey predicts sales in the New York City metropolitan area will decline 3.8% year-over-year, with prices rising 0.5%. Sales in Los Angeles/Long Beach/Anaheim, California will rise 10% from 2020 figures, with prices increasing 7.3%. Miami/Fort Lauderdale/West Palm Beach, Florida will see sales increase 3.7%, with prices rising 7.1%.
However, the strength of the 2021 housing market is highly dependent on the containment of COVID-19 pandemic and staving off a double-dip recession.
