We expect that 2021 to be a strong year for real estate.
- Interest rates are expected to remain low.
- Average home prices will rise.
- Inventory will remain low, despite new construction increases.
- Buyer demand will continue to increase
December 2020 was a seller’s market. The number of for-sale listings was down 38% from the previous year. The number of sold listings increased 0.9% year over year.
The average sold price-per-square-foot was up 18.8% year over year. Average days on market were down 45% and the ratio of sold price vs. the original list price is 96%.
Here are the trends that are driving the market this year:
1. Pent up buyer demand. January buyer inquiries are very strong and we are hearing from buyers that they are ready to go. Many buyers have been waiting on the sidelines since last spring when they did not buy because of COVID-19. Now, they are ready to get back in the game.
2. Demographic Trends. There are two huge bubbles of buyers that need to buy – 30 somethings – The largest generation in history, Millennials, will continue to drive the housing market. Older Millennials will likely be trade-up buyers, while the larger, younger segment of the generation age into their key home-buying years. Also, Baby Boomers need to downsize. They put off moves last year and will be entering the market in larger numbers. Increased new construction hitting the market will give them more opportunities. This should free up inventory for move-up buyers looking in more traditional in-town neighborhoods.
3. Continually low-interest rates – We expect interest rates to remain low (3% or lower) through most of 2021. Low-interest rates increase affordability and are “rocket fuel” for the housing market.
4. Buyer’s desire for more space. The COVID effect – Buyers are anxious to get the spaces they need for home offices, Zoom school, exercise, and recreation spaces, and they are looking for privacy and security. Renters and families searching for more space are driving this type of demand. If they weren’t sure about moving before, they are now.
5. Investors cashing out. Investors will be cashing out in order to cash in on the run-up in home prices that has occurred over the last several years. This will free up properties for buyers and new investors.
6. Rising Prices. Prices will continue to rise in 2021 due to historic low inventory levels and the increasing buyer demand mentioned above.
As always, we suggest you buy or sell for the right reasons for your family. If you would like to have a conversation about buying or selling in the coming year, we are happy to have a discovery call either on the phone or on Zoom.