Real Estate Rundown March 2021
March 10, 2021
Photo by Binyamin Mellish via Pexels
COVID’s Impact on the Housing Market - A Year in Review Plus the Future Predictions
As we encroach upon the first year anniversary of the World Health Organization declaring Coronavirus a pandemic, we reflect on how COVID-19 has impacted the real estate and housing markets and how it will affect these markets in the future.
Redfin breaks down the impacts of COVID-19 with informative facts and figures. According to Redfin, Americans have gained $3.1 trillion in home value due to the rising housing prices. In fact, home prices have surged to the highest they have since 2013. On top of this, there is a record decline in home inventory due to there being significantly more buyers than there are sellers.
Despite the declines in home inventory, there has been a spike in luxury home sales. Redfin also reports that 30.3% of their users are looking to relocate due to the pandemic and the flexibility of telecommuting. Finally, 1/3 of Redfin saved searches have the filter set to single-family homes.
Zillow dives more into the future and homeowner sentiment with results from a survey of over 1,000 homeowners. Currently homeowner confidence and comfort level with moving is only about 52%. Once the vaccine is widely spread and distributed that confidence with moving goes up to 70%. The good news with this is the market will balance out with the inventory of homes for sale increasing. This will even the playing field between home sellers and homebuyers. Currently, inventory is very low causing high demand and high prices.
Rising Mortgage Rates are Here to Stay
Experts report that home prices and mortgage rates are climbing which is making it increasingly more difficult for home-buyers to afford a new home. It is during these times that home-sellers are at an advantage and it is a tough time to be a buyer. However, the homebuyers that are bidding and competing for the inventory out there are highly motivated to move.
Experts predict mortgage rates are on the rise. CNBC reports on the rise of the 30-year fixed rate - on Feb 10, 2021, the 30-year fixed rate was 2.8% according to Mortgage News Daily, Friday, March 5th the 30-year fixed rate was 3.27%, and Monday, March 1st it was at 3.22%. The Washington Post mirrors this prediction with a quote from Zillow economist, Matthew Speakman, “After months of holding firm, even as Treasury yields steadily climbed, mortgage rates have finally relented in the past couple weeks, keeping pace with yields that have turned their steady jog upward into an all-out sprint.”
Homebuying Increasingly More Challenging with Heightened Home Prices
Experts analyzing the trends are torn if home prices will continue to climb in 2021 through early 2022. Some sources predict elevation in home prices will continue to rise through 2021 and into 2022 others point to factors that may contribute to a decline in home prices. In 2020 we saw a record year for the real estate market. Due to supply and demand, home costs gradually rose, is this also going to be the case for 2021?
Sources that predict there is no end in sight (up through early 2022 at least) for this incline in prices site trends and forecasts. According to Home Buying Institute, Zillow stated on their website that “United States home values have gone up 8.4% over the past year and Zillow predicts they will rise 10.5% in the next year.” Freddie Mac’s research team also predicts positive trends for 2021, but not quite at the same scale as Zillow. They predict home prices to rise around 5.4% during 2021.
Barron’s explores reasons why there may be a decline in home prices in 2021. They predict that buyer demand will still continue to be high, but other elements may contribute to home prices decreasing. They cite the following factors that may curb the rise in home prices: 1) heightened mortgage rates, 2) raising supply in homes for sale, 3) slowing employment recovery and still-high unemployment levels.
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