COVID’s Effect on the 2021 Real Estate Market: A Look Back and Future Predictions

by nvrmnd_livvai
9 months ago
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It’s the beginning of a new year, which means it’s time to look ahead at what will be happening in 2021. The housing market in the COVID pandemic could shift interesting ways. The pandemic brought with it uncertainty and instability across all levels of our economy and daily lives. What are we faced with, looking forward to 2021 in terms of the real estate market? Are we headed for more of the same? This article uncovers some snapshots in market trends & predictions for 2021.

Where we came from

Working from home, suburban migration, and dipping interest rates were some large factors influencing 2020 real estate. Aly Yale of HousingWire allures to the low inventory and higher prices of this past year by echoing sage advice. “The best time to buy a home is in a buyer’s market where listings are flush and demand is low. Unfortunately, 2020 has been a seller’s market with buyers facing unprecedented competition and increasingly out-of-reach home prices.” (housingwire.com)

Buying and selling in general was quickly stemmed from the uncertainty of the market, Homelight summed up the early effect of the pandemic on the home market from a pessimistic look at where realtors saw the future headed, back in April 2020. “The National Association of Realtors surveyed 89,813 members in April 2020 to gauge the impact this virus would have on the market. In the survey, 44% of agents reported their clients have postponed the homebuying process by a few months, and 22% have said their clients stopped looking because coronavirus-related job security was a concern.” (homelight.com)

Predicting Real Estate Market Trends – The Outlook for 2021

The greater San Diego Association of Realtors said that “With low mortgage rates and strong buyer demand in most market segments, the housing market of early 2021 looks to continue the trends we saw in the second half of 2020. Low inventory and multiple offers on in-demand properties and market segments are likely to remain common while the market waits and hopes for a boost in new construction and a surge in home sellers to help provide more balance to the market.” (SDAR) Let’s drill down a bit into the lion’s share of contributing factors influencing real estate’s outlook, moving into 2021.

Mortgage rates / Suburban Growth

Homebuilders have seen opportunity in the dwindling supply market, but saw the pandemic cripple their build rates and project times. In December 2020, both inventory and interest rates were at drastic low points. There is skepticism that builders will be able to meet the demand 2021 poses on inventory needs, and the new trend of work-from-home models fueled a “suburban boom”. (noradarealestate.com)

“COVID-19 is accelerating suburban growth, especially in the Sunbelt markets. With a greater emphasis on health and safety, the need for lower density environments and more space has only grown. Remote work and higher taxes in large cities due to declining tourism and business tax revenue are contributing to the shift away from an urban core.” (pwc.com)

Norada Real Estate Investment roots 2021 projections squarely into the factors of housing inventory shortage, and high growth in listing and selling prices. “The housing market is still hot, but we may be starting to see rising home prices hurting affordability unless the mortgage rates continue to decline in 2021.” (noradarealestate.com)

Home prices

Zillow believes these inflated costs will trend down towards a buyer’s favor by the end of 2021, with a return to normalcy at the conclusion of this year. Help seems to be on the way for a balanced market, but how long will that take? “The forecasts center around a baseline prediction of a 4.9% decrease in United States GDP in 2020 and a subsequent 5.7% increase in 2021. Under the baseline scenario, we expect 2%-3% drop in prices through the end of 2020, followed by a slow recovery throughout 2021. Prices will return to Q4 2019 levels by Q3 2021.” (zillow.com)

Demand / Supply

Forbes points out that a low housing supply will continue to stir the economic pot, it seems, coupled with the phenomenon of very low interest rates. (forbes.com) “(H)ousing supply is dwindling fast, aggravated by slower construction due to pandemic slowdowns and restrictions. It’s low mortgage rates, along with the work from home and pandemic migration trends that have had such a dramatic effect on demand for houses. That’s not going to change until about June.” (gordcollins.com)

Respite could be around the corner, with stimulus checks and the advent of a vaccine. Christy Budnick, a Florida Network Realty broker, remarks that “Those who may have been hesitant to sell during a pandemic could see renewed confidence as the country gets vaccinated.” (jaxdailyrecord.com)

Danielle Hale, Realtor.com’s chief economist, tells Forbes that she expects prices to rise another 5.7 percent. She reflects on the likelihood that mortgage rates will increase alongside prices, and bring about difficulties in affordability. “High buyer demand and still-lagging supply will keep prices growing, but at a slower pace than 2020 as buyers contend with mortgage rate and price increases that create affordability challenges. (forbes.com)

Zillow agrees. “As home prices, mortgage rates and rents are likely to rise, bringing affordability challenges that must be faced.” They temper this by pointing out a light at the end of the tunnel from their vantage point. “Demand continues to stay high, and is expected to surge in cities as economies reopen. Annual home sales growth is expected to be the highest in almost 40 years as life and financial certainty brings more sellers into the market to meet the heavy demand, and technology allows for faster connections with interested buyers.” (zillow.com)

Jim Logan is a content creator at Livv.ai