January - Real Estate this New Year: What to Expect

Home sales set a number of records last year despite — and in some cases, because of — the coronavirus pandemic. Although the final data for 2020 has not been released, the trade association for real estate agents expects new-home sales to come in 20 percent higher and existing-home sales to come in 3 percent higher than in 2019. NAR chief economist Lawrence Yun predicts new-home sales will jump 21 percent and existing-home sales will climb 9 percent in 2021. He predicts home prices will rise by 3 percent in 2021.

 

“The consequent rise in home prices has boosted wealth accumulation for homeowners,” Yun said. “But the opposite side of this will mean the continued decline of housing affordability and will limit future homeownership opportunities for young adults if housing supply is not greatly increased.”

 

Yun says mortgage rates will rise to 3.1 percent in 2021.

 

“The Biden presidency could bring several impactful changes to the housing market,” Yun said. “The home buyer tax credit he proposed as a candidate would help Americans cover their down payment costs and is likely to provide firmer assurance of government guarantees to mortgages backed by Fannie Mae and Freddie Mac. In addition, new appointees at the Federal Reserve are likely to pursue an expansionary monetary policy for a longer period, which should keep interest rates stable over the next few years.”

 

NAR identified 10 markets that have shown resilience during the pandemic and which should perform well in a post-pandemic environment: Atlanta; Boise, Idaho; Charleston, S.C.; Dallas-Fort Worth; Des Moines; Indianapolis; Madison, Wis.; Phoenix; Provo, Utah; and Spokane, Wash.

The real estate listings website predicts 2021 will be a robust sellers’ market as home prices hit new highs and buyer competition remains strong. Inventory is expected to make a slow but steady comeback, which will give buyers some relief. However, increasing mortgage 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,” said Danielle Hale, chief economist at Realtor.com. “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.”

 

Home prices could reach new highs in 2021, climbing by 5.7 percent, as growth continues but at a slower pace. The number of homes for sale will slowly rebound, offering buyers some relief. The number of homes for sale in the United States reached an all-time low in December, dipping below 700,000 for the first time.

 

Realtor.com expects existing-home sales to rise 7 percent and single-family housing starts, which are new residential construction projects that are just getting underway, to grow by 9 percent. Mortgage rates will steadily move higher, reaching 3.4 percent by year’s end.

The online real estate brokerage predicts the housing market will remain strong through 2021 as the economy recovers from the pandemic. In early 2021, Redfin chief economist Daryl Fairweather predicted home buyers would remain undeterred by its effects, eager to take advantage of sub-3 percent mortgage rates while they last. She says, “Later in the year, the worst of the pandemic will hopefully be behind us, and as businesses reopen and daily activities become safer, a new batch of homebuyers and sellers will enter the housing market, making for the strongest year of home sales since 2006.”