The housing market will remain strong through 2021 as the economy recovers from the pandemic-driven recession. In early 2021, homebuyers will remain undeterred by the pandemic, eager to take advantage of sub-3% mortgage rates while they last. 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.
Prediction #1: Mortgage rates will remain historically low at 3%
In 2021, 30-year-fixed mortgage rates will rise slowly from 2.7% to around 3%. That could mean homebuyers will be less willing to bid up home prices, but it likely won’t be a large enough change to deter them from purchasing homes. Mortgage rates will remain low primarily due to a sluggish global economic recovery.
Prediction #2: There will be more home sales than in any year since 2006, but price growth will slow
Even as the pandemic hopefully nears its end, Americans will continue to buy homes that fit their new lifestyle. As a result, 2021 will see more home sales than any year since 2006. Annual sales growth will increase from 5% in 2020 to over 10% in 2021.
Prediction #3: There will be more new homes built than in any year since 2006
More new homes will be built next year than in any year since 2006. For over a decade, builders have struggled to construct enough homes to meet demand due to high costs of construction, but since the pandemic began, construction of new homes has spiked. Building permits were up 21% from September to November compared to the same time last year.
Prediction #4: The homeownership rate will reach 70% for the first time since 2005
By the end of the year, the homeownership rate will rise above 69% for the first time since 2005. The normalization of remote work during the pandemic has set off a domino effect of increased homeownership.
Prediction #5: Most homebuyers will make an offer on a home sight unseen
In spring of 2020, 45% of recent homebuyers reported they had made an offer on a home sight unseen during their search for a home, and recent preliminary survey data shows the trend is becoming more common. The increased use of 3D walkthroughs and video tours, coupled with more people relocating out of town, means the sight-unseen homebuying trend will continue, with the majority of 2021 buyers making an offer before stepping foot in the home.
Read full article at: Redfin