What to Expect from Real Estate in 2021

What has 2020 been like so far?

This year has been tumultuous, uncertain, and unique in every way. The real estate market has not been immune to the crazy roller coaster this year has proven to be. 

In many ways, the coronavirus pandemic has continued a trend that had already started early in the year. The real estate market is very strong right now on the surface, as homes fly off the shelves like hand sanitizer, and sellers in great control demand being super strong. 

Many experts assume that this is due to very low mortgage rates. Homebuyers have been empowered with the opportunity of time they may not have had before, with many working from home, boosting existing home sales in unprecedented ways.

According to Fannie Mae, there are a couple of reasons why home supply is at an all-time low. With homebuyers buying rapidly, and sellers nervous about selling during a pandemic, the number of homes on the market is drastically dwindling. 

Heading into 2021, the real estate market trends we see may very well depend on the possibility of multiple coronavirus waves. As unemployment has fluctuated powerfully in 2020, this is also a major player in next year’s market.

2021 Real Estate Related to the Economy of 2020 and Unemployment

The unemployment rate has been unprecedented in modern history due to the pandemic. These historical rates have caused uncertainty in next year’s numbers. 

The stimulus earlier in the year gave buyers some confidence in recovery. However, with no second stimulus in clear sight and a great deal of lack of confidence that one is forthcoming, financial leaders assume that 2021 will see an incredibly high unemployment rate.

With high unemployment rates in mind, homeowners already reluctant to sell may continue to hesitate. If they do take the plunge into selling their home, prices will continue to rise, as financial instability will be forefront in their minds. 

Unemployment rates have also caused a rise in delinquency of payments. With homeowners losing jobs due to coronavirus, and unemployment and pandemic benefits have run out, the ability to make payments on time has been greatly affected.

In 2021, these delinquency issues cause a lack of confidence in selling and buying homes – they also cause lenders to pause in hesitation in these times of high risk and uncertainty. 

What Will Mortgage Rates Look Like in 2021?

Much of what happens with the housing market mortgage rates staying very low will depend on several factors. One of the largest factors is the federal government’s response to the market and whether they choose to continue keeping rates down. 

Another contributor will be whether there are resurgences of the coronavirus, whether more “waves” are forthcoming as have been hinted at in the scientific community, and when in 2021 they may occur. Of course, things like furthering advancements in treatment and the advent of a vaccine will indelibly alter the populace’s mental state, thereby changing the global market. 

Provided the environment surrounding the coronavirus crises improves, the trends would show it possible that the rising median prices for houses with lower interest rates will continue into 2021. The home prices would then stabilize towards the middle of the year and come down towards the end of the year.

However, with so much uncertainty, these trends may not be confident. Experts are changing their forecasts consistently as the crisis evolves. It is currently anticipated that should a vaccine not be forthcoming in short order, the prices will increase steadily throughout 2021, with some sharp increase later in the year.

What are Possible Concerns for 2021?

Most of the 2021 housing market adversities now center around the progress of the coronavirus on the world stage. It also depends on the response to the crisis in terms of public health. This response creates profound effects on the economy and unemployment rates.

Some of the challenges that are of concern are:

• The instability of the housing market due to the unknown related to coronavirus. The pandemic’s response to treatment and vaccine is directly related to confidence in the seller and the buyer. If the virus has more spikes and doesn’t decline, this could cause a loss of confidence in the market.
• Employment rates concerning the coronavirus. Suppose unemployment rates continue to grow in response to challenges brought about by the global pandemic. In that case, that will continue to give buyers pause in worry about their job status, and sellers in concern for losing what they already have in an unstable job environment.
• Little confidence lenders have in the economic recession. Recession causes a great deal of overall concern in our economy, and with the pandemic being a worldwide issue, the global economy is sustaining trauma rarely ever seen before. This snowball effect created hits home in the housing market profoundly. If the economy cannot start bouncing back relatively quickly, this will cause a negative ripple effect on the market.

What are Possible Positives for 2021?

All hope is certainly not lost yet. There are some advancements in the scientific and medical communities that may help the numbers of affected population by the coronavirus start on a downward trend, which would be great for the housing market. 

Possible positive outcomes to the 2021 housing market are:

• A second stimulus, partnered with medical advancements in the fight against coronavirus, will give buyers more confidence and buying power. A possible second round of money would grant sellers more confidence in the market to sell their properties. 
• A recovering economy on a global scale. As we work together to defeat the pandemic, jobs will begin hiring back, the wheels of unemployment grinding down. As this happens, the economy will make a recovery, and people may breathe a sigh of relief in their ability to move on – into a new property. 
• The interest rates will remain low, prices are driven down as a result, and bankers will gain confidence in lending again: This is the perfect trifecta that remains unclear in its actuality but is still not outside the realm of possibility. Should the correct formula of a rebounding economy plus effective virus response added to dropping unemployment rates occur, this outcome could see the light of day.