As dreadful as 2020 revealed itself to be, the housing market was a bright spot. And industry experts predict that should continue into 2021.
Three factors will fuel the housing market in 2021, said NAR Chief Economist Lawrence Yun, as reported by Investor’s Business Daily.
- The Federal Reserve has no intention of actions that would raise record-low mortgage rates.
- Unemployment will decrease as mass vaccinations by mid-2021 will allow the economy to fully reopen and begin rehiring.
- Homebuilders will boost inventory to meet demand.
“In 2020, there’s been a lack of inventory,” said Yun. “That’s why multiple offers have been prevalent. But builders are starting to construct more single-family homes. And it is single-family homes where the consumer preference has shifted.”
Top Housing Markets Amid Work From Home
In response to urges from the CDC to social distance, homebuyers in 2020 shifted away from high-density urban areas to suburbs. Many also began working and learning from home, creating a need for larger homes to accommodate office space. NAR says the work-from-home trend is likely to hold in 2021. It predicts the share of the U.S. workforce working from home to be 18% in 2021, down only slightly from 21% in 2020.
“Even if we have the vaccine, I think many companies will continue to evaluate how much flexibility they want to provide to workers who want to work from home,” Yun said. As workers logging in remotely continue moving to less-expensive areas, more-affordable markets will see further growth in 2021.
New Year, New Record Low for Mortgage Rates
Despite a full percentage point decline in rates over the course of the past year, housing affordability has decreased because these low rates have been offset by rising home prices, according to sources Freddie Mac and CNBC.
However, experts are anticipating that rates will begin to rise this year. The combination of rising mortgage rates and increasing home prices will accelerate the decline in affordability and further squeeze potential homebuyers during the spring home sales season.
Nevertheless, the Freddie Mac weekly survey shows the average rate for a 30-year fixed mortgage is 2.65%, which is 0.02 points lower than last week and 0.99 points lower than last year.
Despite Tension in the Capitol, Stocks Rise to All-Time High
On Wednesday, rioters supporting President Donald Trump stormed the U.S. Capitol just as lawmakers started the procedural process of counting the Electoral College votes and formally declaring President-Elect Joe Biden the winner of the 2020 presidential election. Still, the Dow and the S&P 500 closed higher on Wednesday as traders looked beyond the event amid increasing prospects for more fiscal stimulus, according to CNBC.
“There should be no mystery as to why the markets didn’t care about what happened in the Capitol yesterday, however disturbing, disgraceful, and embarrassing it was,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. “It’s because it has no bearing on the direction of the economy, earnings and interest rates. It’s that simple.”