Happy New Year! Many of us are excited to see the end of 2020, and a New Year means a new housing market… right? Well, maybe not, or at least not yet.
It’s difficult to pin down one 2021 housing market prediction that will be 100 percent accurate, but there are a lot of compelling points being made from very detailed analyses. Let’s take a look at a few of them.
Realtor.com predicts the return of “seasonality,” suggesting we will see a strong seller’s market continue through the spring and summer but eventually fading as we get to the fall and winter of 2021. Home prices are predicted to even out as more sellers come to the market over the course of the year, made comfortable by the availability of the COVID-19 vaccine. Specifically, Realtor.com expects to see the national inventory start to increase towards the end of the year.
Who will continue to enter the market? It’s anticipated that Millennials and members of the younger Gen Z will be the dominant players with older Millennials trading up from their current homes and Gen Z and the younger Millennials beginning their journey into the housing market.
Where will they go? Realtor.com suggests a continued interest in suburban areas as jobs continue to be work-from-home, the need for a short commute is relieved, and focus turns to cheaper home-buying options.
While these are some great insights, it’s important to look at multiple sources, and Zillow has their own insights, as well.
Zillow suggests the 2021 housing market will remain strong and maintain the high demand for inventory we saw throughout 2020. In fact, Zillow suggests a 40-year high in sales growth stating, “Zillow expects that mark will be shattered next year, forecasting 21.9 percent annual growth for a total of almost 6.9 million homes sold. That would be the biggest annual sales growth since 1983.”
Another differing opinion – Zillow also predicts that cities will boom as people return to urban areas post-vaccine, with the recent decrease in rental prices being a big draw. Zillow says, “In some places like New York City and the City of San Francisco, rents fell 12 percent and 5.1 percent, respectively.” They suggest the return of renters to cities will be followed by a subsequent rise in prices and it may be aggressive to make up for previously lost revenues.
One point both Realtor.com and Zillow.com agree on – the housing market will continue to favor sellers. In fact, Zillow predicts rapid growth in prices this year as demand continues to outpace supply.
What about mortgage rates? Zillow predicts an increase in mortgage rates that won’t halt buyers but may slow them down, especially if they are already struggling to stay competitive in the current market. Other industry experts like Boston.com predict the same, suggesting an increase to over 3 percent. Freddie Mac, however, seems to disagree, predicting mortgage rates staying relatively flat and maybe only seeing a small increase.
One thing is for sure, it will be interesting to see how the housing market responds to the unexpected disruption it faced in 2020.