While nobody has a crystal ball (none of us predicted a global pandemic or record-low mortgage rates in 2020), here are some predictions from the experts about what to expect in the real estate market in 2021.
Home prices will go up
Across the nation, listing prices grew 13.3% in 2020, according to Realtor.com, while the median existing-home price for all housing types in November was $310,800, up 14.6% from year before. Prices increased in every region of the country. Experts forecast prices again will stay on an upward track.
Housing sales growth will be the largest since the 1980s
Even if home prices rise, that won’t dampen home sales. In fact, growth in home sales in 2021 could be the largest since the 1980s, according to Matthew Speakman, economist at Zillow.com.
“The swell of millennial buyers — with the also enormous Gen Z cohort right behind them — aging into their prime home-buying years and looking to enter the market should keep demand firm,” Speakman said.
Mortgage rates will inch slightly higher
Rates ended the year at 2.67%, according to Freddie Mac, a government-sponsored enterprise that backs millions of mortgages. They dipped slightly lower in the first week of January. But homeowners should expect rates to inch higher later this year. “Homeowners should know that the low interest rate environment is as low as mortgage rates will ever get. If they want to secure a low mortgage rate, I would encourage them to do it early in the year,” said Daryl Fairweather, chief economist at Redfin, a real estate brokerage firm. “Rates will increase by a couple tenths this upcoming year.” Rates are expected to end at 3.2% at the end of 2021, according to the Mortgage Bankers Association forecast.
Refinance volume will decrease
Those historically low rates fueled a refinance boom last year. The average 30-fixed year mortgage rate hit a record low 16 times in 2020. Some lenders reported origination volume up to four times than normal. Overwhelmed lenders even offered rates that averaged higher than those recorded by Freddie Mac to quell the volume. The Mortgage Bankers Association’s refinance activity index was 100% higher than a year earlier for the last week in December. While purchases are expected to grow 8.5% to a new record of $1.54 trillion in 2021, refinance originations are predicted to slow next year, decreasing by almost half to $946 billion.
If these predictions come true, rising home prices and slightly higher interest rates could mean that those who act swiftly to secure their next home will benefit with lower monthly payments and/or more house for the money. If you are thinking about a move or a refinance and would like a personal consultation to form your best strategy, reach out to me and my team at Fountain Mortgage. We specialize in comprehensive consultations with homebuyers to create a plan for success.