What to Expect in 2021
It's fair to say that most people have expectations that 2021 will be a better year than 2020. With 2 vaccines now in production, there is hope on the horizon that life can start getting back to somewhat of the normal we remembered pre-pandemic.
As for the real estate market, 2020 brought a strength that we certainly didn't see coming. We knew it would be strong, but interest rates at their all-time lowest and the pandemic making home an even more important space, we saw higher demand and sales in 2020 as compared to 2019.
2021 is just a few days away, and there were certainly a lot of lessons learned in 2020. One key lesson that all homebuyers will want to take into 2021 with them is housing affordability.
Yes, home prices continue to climb because of low supply and high demand. As you will see in the chart above, with a 20% down payment and a $3,000/month mortgage payment, the interest rate plays a key role in how much home you can afford. For example, at the end of 2018 when rates were hovering around 5%, buyers could afford just under $700,000. Fast forward 2 years and buyers can now afford a home priced for $200,000+ more - up to $925,000. So even though the idea of paying $900,000 for a house that might have only been $825,000 a year ago, know that it is still "affordable."
You may hear some people tell buyers to wait for the market to drop because prices continue to increase at such a quick rate. However, analysts don't anticipate prices dropping at all in 2021. In fact, they anticipate prices continuing to increase as well as anticipating interest rates to increase as we slowly come out of the pandemic. The wait and see approach is not going to work for buyers in 2021. Instead, they must be as aggressive as they can be in their pursuit of a new property and be realistic about its ever increasing price.
For sellers, 2021 is going to be another fruitful year. As many sellers have learned in 2020, the best strategy for getting the highest purchase price for your home is to price it at fair market value. At fair market value, there will be multiple parties interested, causing the demand for the property to increase, ultimately leading to a higher sale price - not to mention, seller-benefitting terms like quick escrow and free rent back.
Understandably, sellers were (and still are) concerned with allowing buyers (ie. strangers) into their home in fear of COVID-19. With the new requirements for showing properties, 2020 has brought us an efficient process for getting only serious buyers in to see a property - no more neighbor looks-lou's at open houses.
Pricing at fair market value with only serious buyers coming to see the property in person will result in very few days of actual showings (2-7 days, maximum) and multiple offers. To capitalize on multiple offers, sellers are best set up for success if they list their house on the market while interest rates are at their lowest - which is right now! Because we are entering 2021 with a record low inventory of properties, the winter and spring markets are going to be very hot for sellers. Those who drag their feet and wait until the late summer and fall markets might lose out on tens of thousands of dollars.
Of course, if you find yourself wanting to buy or sell (or both) properties, contact us today. It is our goal to make your real estate dreams a reality. We can put together a plan that gets you from where you are now to where you want to be. For more information, contact us at firstname.lastname@example.org or 949-444-1601.