At the beginning of last year, the onset of the COVID-19 pandemic led to mass economic hardship and uncertainty. When it came to the housing market, many people were unsure of what these new economic conditions would mean, but the housing market for 2020 was booming after some retrenching. Mortgage rates were hitting all-time lows, and inventory was running out as home prices were appreciating. This led to an incredibly enthusiastic and competitive market that created more wealth for homeowners and led to an overall great year for the housing market. So, will it be a repeat of the roaring 20s we saw last year? According to experts, the answer is yes!
The pandemic led to more people spending more extended amounts of time in their own homes than usual, making many realize that their space is no longer suitable for their needs. With work from home and remote learning, the demand for things like office space or more rooms has led to some homeowners looking for a new home altogether. In particular, work from home has also opened up the market for people who no longer have to live in a commutable distance to their workplace. In 2020, we saw a massive wave of buyers, caused by the postponement of the spring selling season. However, according to the National Association of Realtors and Zillow, 2021 home sales are expected to rise 21% as people search for homes that will meet their newfound needs, which will be the highest sales growth since 1983. These buyers will also be joined by the buyers who put off their home search altogether last year to wait out the worst of the pandemic, as well as those who want to take advantage of low mortgage rates while they last. According to chief economist Daryl Fairweather, "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 home buyers and sellers will enter the housing market, making for the strongest year of home sales since 2006". Fairweather predicts the annual home sales growth to rise from 5% to 10%, which is less than her counterparts at NAR and Zillow, but still a considerable growth rate that is sure to make for a robust market.
The 2020 housing market saw a steady rise in home prices, and this is a trend set to continue in 2021. NAR's chief economist, Lawrence Yun, predicts that home prices will rise by 3% in 2021. This number is conservative compared to Zillow's estimation that appreciation in housing prices will exceed 10% in 2021. However, experts agree that the market will be less affordable, which may put pressure on first-time home buyers. The median household income for first time home buyers in 2020 was $80,000, up from previous years. However, some experts predict a stabilization of price in the upcoming year. Experts predict that an increase in listings, paired with a slow rise of mortgage rates, will soften the price growth to under 5% in 2021, which will be down from the 6% rise in 2020. The new Biden presidency could further offset the affordability of housing. During his run for office, Biden proposed a homebuyer tax credit that may alleviate homebuyers' financial stress. New appointees at the Federal Reserve may also pursue an expansionary monetary policy for a more extended period, which would keep interest rates stable over the next few years.
Last year we saw a strong seller's market, which is set to continue into this year. The housing market experts predict 2021 to be a robust seller's market, although inventory is expected to make a slow and steady comeback, which will give buyers some relief. The market will be more balanced in the upcoming year and expect a 5% or more growth in listings to alleviate market demand. The homebuying process saw a lot of change last year with safety in mind to suit buyers' and sellers' needs during the pandemic, and this year those changes will be solidified and perfected. It's now easier than ever to use technology when buying or selling a house with the ability to tour listings virtually, as well as close on purchases virtually in some cases.
In conclusion, the housing market for 2021 is a continuation of many trends we saw in 2020. The seller's market will continue, home sales will rise, as well as home prices. There may be legislation on the horizon to offset the expense of buying a house, and mortgage rates will increase but continue to remain reasonably low overall. Charlotte, North Carolina, is one of the top cities expected to see a rise in home price and sales, and that homeownership will rise above 69% for the first time since 2005.