It is no secret that 2020 had its fair share of troubles and that the pandemic significantly disrupted our economy along with the housing market. But what will the housing market in 2021 look like?
The housing industry was seemingly the only silver lining in the economy and for home buyers and real estate investors.
By taking advantage of the low mortgage rates, most Americans can purchase homes, most of them for the first time.
Let us look at how the economics of the 2021 housing market is likely to shape out.
The Low Mortgage Rate Will Linger
As the country tries to get back on its economic feet, low mortgage rates will linger longer.
Any expected rise will be small and gradual and might not keep off those seeking financing.
The demand for homes is still very high, and most people will continue taking advantage of access to available and cheap financing. With this potential, the prices of housing will continue to go high.
There Will Be an Increase in the Construction of New Homes
The same low rate incentive for home buyers will also see home builders use it to finance their new constructions.
The increase in home prices will drive some people to want to build rather than buy.
Construction might end up being a cheaper option for many. The great migration to the semi-urban areas will boost home building for those looking to move away from the city.
More People Will Be Homeowners
With most people working from home either by choice or company policies, many people will be seeking to buy homes that do not rely on office locations.
The people who used to rent in the cities to be closer to their offices now want to move to the suburbs for bigger quieter spaces. The prediction is that homeownership will rise to 70%1.
Besides, there is a possibility of many previous homeowners owning a second or a third home. The growth in homeownership has not reached such heights for a long time.
The Rental Market Will Be Affected
The shift from cities to the suburbs will change the rental market by making rent lower in the cities and higher.2 A low rate of vacant houses equates to high demand and, therefore, high rent.
The demand for rental and purchase of homes in the suburbs has gone relatively high compared to the cities.
It will be more challenging to find a rental property in the sub-urban area than in urban areas.
On the other hand, the low demand for homes within the cities will bring down the rental rate, hurting investors’ economy in the cities.
The 2021 Housing Market
The era of virtual is with us, and homebuyers, renters, and investors should be ready to make deals and closures virtually. Also, to apply and receive mortgage loans electronically and attend virtual tours and meetings.
The economic impact here is that many jobs will not resume as they used to, leaving many unemployed.
There is a significant shift in the housing market regarding location preferences, with most homeowners and renters opting to move away from the urban areas.
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Links To External Sources
- The US Rental Property Market Outlook https://managecasa.com/articles/us-rental-property-market/
- Redfin’s 2021 Housing Market Predictions: 14.5 Million Americans Will Move Out of Town, Fueling 10% Sales Growth https://www.redfin.com/news/Housing-Market-Predictions-2021/