2020 is probably the most eventful and dynamic year over the past few decades in the area of economics and especially the real estate market. The positive attitude and forecasts for the beginning of the year were replaced by a decline and a crisis in the middle. By the end of the year, there was a sharp rise — in just a few months, home prices reached their highest levels in the last 10 years, and the percentage of sales increased every week. Of course, there is no talk of a full recovery of the real estate market, but low mortgage rates, state and local support programs and new preferences of potential buyers have played a leading role in the development of the housing market and the global economy as a whole.
Experts argue that 2021 will be the successor to these trends, although without sharp leaps.
Forecast for 2021.
1. Mortgage rate.
One of the best news for home buyers is that the 30-year US mortgage rate will remain at its lowest level of around 3%. Possibly a slight increase to 4% by the end of 2021. This is what will support the increasing demand from potential buyers for housing throughout the year.
2. Sale of houses.
Home sales are expected to rise by 7% in 2021 from last year, following a more normal seasonal trend: picking up steam in the spring, peaking in the summer, and maintaining momentum in the second half of the year.
Due to the availability of the coronavirus vaccine and the renewed purchasing power of people, home sales, especially in the second half of this year, will increase to 60%. This is also due to the fact that in 2021 the construction of new houses is planned more than in any other year since 2006.
3. The cost of houses.
In 2020, due to the very limited number of properties for sale, both ready-made and under construction, house prices rose sharply by at least 10%. This year, the increase in prices will be, but at a slower pace due to a gradual increase in market saturation and satisfaction of demand. According to many experts, prices will rise in the first half of this year, and then in the spring and summer, the rate of increase will noticeably decrease.
“In the second half of the year, a collapse in prices is possible as a result of the actions of the new administration of Joe Biden. One of the first decrees signed by the new US President was the extension of the grace period for student loans. In the spring, a moratorium on the eviction of non-paying tenants who have lost their jobs due to the pandemic ends, which may also be extended. If this does not happen, a series of evictions and sales of mortgaged real estate will begin. If, nevertheless, the decree on the extension is signed, this process will be postponed, but then the number of proposals and the fall in prices will be even greater, like in 2008. However, this is a great investment opportunity with a growth forecast in 3–4 years, especially if the rate remains at 3–4% or even decreases. ”
Denis Podshivalenko , Ph.D., MRICS, digital asset valuation expert, CEO at vOcenke.ru exchange
4. Migration.
Last year, the period of isolation changed the desires and requirements for their own housing on the part of buyers. Taking into account the possibilities of remote work and ideal credit conditions, people began to look closely for housing outside the city. This trend will continue to gain momentum this year. According to experts’ forecasts, about 14.5 million people migrate from large cities. The last time such indicators were in 2004. Such a forecast will help the economy for example , Buffalo , Cleveland or Pittsburgh . Those areas that before the pandemic fade into the background, giving way to lively, business centers.
This leads to another story: small landlords in large cities began to lose their clients and seek to sell real estate at good discounts. In some cities, discounts go up to 17%, which is another pleasant bonus for buyers. People still want to live in San Francisco or New York. The culture and art of large cities will always attract tourists, and the period of the pandemic will end sooner or later. Therefore, investors are ready to invest in such real estate, hoping to return their money in the future.
Satellite cities will also become popular this year. For example, if earlier large southern cities such as Austin , Phoenix, Miami were in demand , today they are unavailable both in terms of the number of offers and the value of real estate, and the trend for seclusion has its influence. Thus, buyers began to pay attention to cities such as San Antonio, Tucson, Tampa . It is on them that experts are betting in 2021, since people who are not tied to their place of work can afford to buy a house with a larger area, but affordable, in a quiet small town.
Taking into account the trends that the pandemic caused in 2020, we can say that this year will be more stable. The opportunities and needs of buyers will grow as the economy and the purchasing power of the population recover, which means that sellers do not have to worry about demand and price. If we approach the issue of the deal with reasonable and realistic expectations, then 2021 should become profitable, predictable and more anticipated for everyone.
Dmitry Tsyplakov, CPO of Fincase
Denis Podshivalenko Ph.D., MRICS, digital asset valuation expert, CEO of vOcenke.ru exchange
