According to realtor.com, additional lock-in measures may slow down the real estate market.
With the end of a year of tight supply and rapid housing price increases, economists at realtor.com believe that housing inventory shortages will not be so terrible in the housing market in 2021. However, it all depends on the course of the COVID-19 pandemic.
The forecast said that further lockdowns and isolation due to COVID-19 might weaken housing inventory and sales, slowing the market and putting more pressure on homebuyers. However, if the vaccine is launched quickly, it may lead to “better than expected sales” and an increase in housing prices and inventory.
Danielle Hale, the chief economist of realtor.com, said: “The real estate market in 2021 will be more normal’ than the violent fluctuations we saw in 2020,” “Homebuyers may finally be late this year. Sometimes more homes are chosen, but as prices remain high and mortgage interest rates rise, home buyers will face new affordability challenges.”
As jobs in remote areas become more common, the number of homeowners moving to suburban and rural areas has increased this year. The forecast says that unless remote work continues and depends on whether and when vaccinations are given, these houses’ demand may cool. However, if more companies commit to long-term remote work, the demand in rural and suburban markets will continue to grow.
However, realtor.com predicts that by 2021, the seller’s market will continue to maintain strong growth. Housing prices are expected to hit new highs, and inventories will “recover slowly and steadily.” The mortgage rate is expected to increase by 2021-hovering around 3%, and then slowly rise to 3.4% by the end of the year.
Buyers’ inventory will also be reduced even more. More homes are expected to be listed. Besides, it is expected that the number of construction starts will increase by 9% by 2020. However, even if the number of new construction starts soared by 9%, it would not be enough to curb the continued rise in housing prices. House prices will not increase as fast as this year, but they will continue to hit new highs with an expected growth rate of 7% by 2021.
In 2021, millennials will continue to drive the market, and Gen-Z will enter this market.
Hale said: “Due to reduced cash and no home equity, millennials and Gen Z first-time homebuyers will be the most affected by rising house prices and interest rates.” “While waiting until the fall or winter of 2021 may mean more housing options, but those homebuyers who can find a home purchase opportunity at the beginning of this year may see house prices and mortgage interest rates fall.”
There may still be a double-dip recession in the new year. Realtor.com forecasts that although the United States continues to show a K-shaped recovery, the inequality gap is widening.
The report said: “In the short term, this may lead to a reduction in consumer spending, which may have a broader impact on business and economic growth.” “In the long run, this may affect the U.S. housing market because of “probable” buyers. Will disappear from the market, cooling demand and driving down housing prices.”