When the pandemic hit the U.S. in the first quarter of 2020, the economy stalled, and homebuying and selling ground to a halt. People spent more time at home, shielding themselves from the uncertainties of the coronavirus, and by the time the real estate market came alive again, people were ready to buy. According to an August 2020 survey by Redfin of 1,000 people who were planning to buy a home within the next 12 months, 25% of respondents stated the pandemic caused them to want to move or speed up their moving timeline, and 17% indicated they were interested in looking for a less expensive home.
This increase in demand for homes caused listing prices to climb, and that trend has continued through the first four months of 2021, due to the pandemic-fueled desires of people wanting a new home coupled with continued low-interest rates.
While the U.S. housing market is booming, that doesn’t mean that everything’s coming up roses for everyone involved. Tyler Forte, founder and CEO of Felix Homes, offered this insight into what will happen the rest of the year.
“2021 will be defined by low-interest rates and low inventory, a perfect storm that will continue to push home prices higher,” he said. “For buyers, this means homes going under contract in days if not hours. It means multiple offer scenarios where you are up against five, 10, 15 or more competing offers.
“For sellers,” he continued, “low inventory will mean their home should sell pretty quickly and for a great price. The trouble is, once it sells where do you go? Home prices are high across the country so it’s not like you will be able to find a great deal by moving out of state.”
Here’s more on what the housing market looks like so far this year and what will happen next.
Interest Rates Will Remain Relatively Low
The pandemic brought about the lowest 30-year fixed-rate mortgage average in U.S. history. It plummeted to 2.65% in January 2021, down from 3.64% approximately one year earlier. And while it did climb to an average of 3.18% at the beginning of April, by the end of the month, it was back down to 2.98%.
“Interest rates will continue to rise but remain low through 2021 and possibly 2022,” said Bruce Ailion, realtor and attorney. “Any significant slow down in mortgage applications or housing sales will be responded to by interest rate reductions.”
Home Inventory Will Increase
The average total “for sale” housing inventory for January was 895,381, dropping to 822,790 in February and 808,071 in March. It’s expected that home inventory will increase — but not at breakneck speed….