After a real estate year like 2020, you might be wondering what 2021 has in store. Despite the fact that many markets were shut down the first quarter of 2020, it is said by experts that the surge in home sales at the end of 2020 actually made up the difference. Kinda crazy! So what’s next? While we can’t predict the future, we can make some educated guesses as to what trends to expect.

1.      Seller’s Market

All of 2020 was a seller’s market, and it looks like we are still headed in that direction. A seller’s market occurs when there are more buyers than there are sellers. This means the home inventory is very low, giving sellers an advantage. To provide some perspective, home inventory was down 22% in November 2020 compared to the previous year.

As a buyer, this makes for a very competitive market. If you are searching for a home, you will want to make sure you have all your ducks in a row. Have your preapproval done and ready because when you find a home you love, you won’t have much time to waste.

Also think about expanding your search. Sometimes just looking another 10 minutes down the road can change the price and market substantially.

As a seller, you have less competition and can likely choose which offer to accept. Many sellers have received multiple offers on homes within a week. On the flip side, if you are moving, I would recommend finding your next home BEFORE you sell your current home. It will be more difficult to buy than it will to sell.

2.      Increasing Home Prices

Due to the sellers’ market and the increase of demand, we can expect to see home prices continue to rise. In November 2020, home prices increased by 15% from the previous year. This puts the median home price over $300,000.  

As a buyer, know your budget and stick to it. The last thing you will want to do is overpay for a home due to the competitive market. Experts recommend limiting your housing payment to 25% of your overall budget. This includes principle, interest, property tax, insurance and PMI (if your down payment was less than 20%). Also, take some time to save money for a down payment. This will help reduce your overall mortgage. If you can save 10-20% to put down that will save you a lot of interest in the long run. Also anything less than 20% you will have to pay an additional mortgage insurance called PMI. This gets tacked onto your monthly payment until you reach 20% ownership in your home.

As a seller, the increased home prices are great! It puts a little more money in your pocket, and is very helpful if you will be purchasing a new home due to the increased prices.

3.      Mortgage Rates will Remain Low

Interest rates were at an all time low all of 2020, which is what spurred a lot of the real estate transactions. It is expected the interest rates will still hover around 3% for 2021 which is still very low.

As a buyer this is great news! With lower interest rates comes lower monthly mortgages. BUT keep in mind, a super low interest rate on a home you can’t afford is still a bad deal. So make sure you know your budget and you can come out on top.

As a seller, the low interest rates motivate buyers to buy sooner rather than later which is good news for you! It is also good if you plan on purchasing a new home.

Whether you are buying or selling this year, you will be able to take advantage of the real estate market trends.

Source: Real Estate Trends 2021: What You Need to Know | DaveRamsey.com