By: Qingqing Ouyang (‘23)
Although there were many drawbacks in the year 2020, surprisingly, house market trends have been on the positive side. There is an expected increase in home sales of 3.6% from 2020 to 2021, which would be the highest rate since 2006. The main reasons for the buildup are interconnected. Firstly, the COVID-19 vaccine will spur the economy and bring back jobs; secondly, the Federal Reserve will not increase low mortgage rates; and thirdly, due to the expected “V-Shape recovery,” increased home-building is in place to meet client demand. Furthermore, the slowdown of inventory of only 500,000 homes for sale in 2021 has caused builders to construct more homes, especially with increasing costs. Not only because of the reasons stated above, but COVID-19 has also paused mortgage payments for the unemployed. Ultimately, this could lead to more sales in the housing market due to the probable incapability to find a job to pay their mortgage fees.
Aforementioned, while the housing market has been booming, the opposite can be said for mortgage rates, which are beyond low recently. However, as 2021 enters, economists suggest that mortgage rates will slowly return to their normal range. It is predicted that there will be a 9% increase again in the single-family house market. Moreover, homeowners will likely be taking advantage of this low-interest period by refinancing and carrying out deals.
So, what should buyers and sellers be doing? For now, economists suggest that buyers be wary of the events happening around them. The demand for houses due to the low inventory will likely create higher prices until May of 2021, and cool down during the second half. The low-interest rates, however, can alleviate cost concerns and motivate buyers to purchase homes. On the other hand, sellers will continue to have consistent sales during this swelling house market duration.
All in all, 2021 will be booming with home purchases. The low-interest environment is a great opportunity for buyers to purchase homes, but it is important to be informed of any new changes.