2020 was a unique one for real estate. Though the pandemic slowed the majority of the economy down, the housing sector boomed.
In fact, it saw almost unprecedented success. Buyer demand soared (up 40% at one point), bidding wars were a constant presence, and mortgage rates bottomed out — hitting a new record low more than a dozen times over, according to Freddie Mac.
The market even bucked the traditional fall slowdown, with unseasonably strong demand well into the cooler months. All this, despite an ever-worsening pandemic.
But now that 2020 is (finally) at its end. Will it be the end of the current housing boom as well?
According to experts, we can expect more low rates, still-rising prices, and a continued exodus to the suburbs, among other trends.
Here’s a look at what to expect for housing in the new year:
Home prices will keep rising.
On the backs of high demand and extremely limited inventory (the lowest on record), home prices shot up in 2020. According to Realtor.com’s most recent housing report, home prices increased 12.7% between November 2019 and November 2020. That’s up from the 12.2% bump seen in October.
Locally the Northwest MLS report summarizing November activity shows strong year-over-year (YOY) increases in closed sales (up about 23%) and prices (up 13.8%). Pending sales (mutually accepted offers) rose 7.9% from a year ago, and the year’s saga of depleted inventory continued last month with the number of total listings down nearly 43%.
- Seattle Metro/ Real Estate Is Expected to Shine in 2021
- Median home price: $629,050
- Anticipated home price change: 9.7%
- Only San Jose is expected to have higher appreciation ay 10.1%
- Seattle Inventory is down 50.6% for Residential Listings
- Condo inventory however is up 7%
- A closer look at the MLS report for all counties shows the shortages are most acute for single family homes (off 50.6% area-wide), while the condo supply improved (up 7.1%).
- For the sixth consecutive month bidding-wars have exceeded 50 percent for all home sales, reaching nearly 57% for the previous month alone.
- The real estate market in King County as a “tale of two cities”, “While the residential market continued its trend of record low inventory, the condo market holds record high inventory when looking at the second half of the year, compared to the same periods over the past eight years.”
- Economist Gardner said there have been some “interesting shifts in the King County condominium market.” While the supply of single-family listings across the county remains painfully low, condo listings are 39% higher YOY. “Some are suggesting the increase in condo inventory is COVID-19 induced.
- Shifts are seeing people relocate out of cities for larger homes in the suburbs.
Mortgage rates will stay low … ish.
If you haven’t gotten around to refinancing just yet, it looks like you still have some time. Most experts expect mortgage rates to stay low for quite a while — through 2021 and beyond, actually.
“We are cautiously optimistic mortgage rates will continue to stay low and even slightly decrease in the short- and medium-term,” said Rich Weidel, CEO of Princeton Mortgage, a mortgage company based in New Jersey.
Forecasts from the Mortgage Bankers Association, Fannie Mae, Freddie Mac and Realtor.com predict an average 30-year interest rate of anywhere from 2.9% to 3.4% throughout the year. Though that’s technically higher than today’s 2.67% average, it’s still extremely low, historically speaking.
Consumers will likely see the lowest rates at the start of the year, before COVID-19 vaccines are widely available. They’ll then increase — at least slightly — in the back half of 2021.
“Mortgage rates and the economy have an interesting relationship,” said Ali Wolf, chief economist at Zonda Home, a housing market research firm. “Economists and analysts alike expect economic activity to unleash during the second half of 2021 once the vaccine becomes widely distributed. A strong or strengthening economy is typically linked with rising borrowing costs.”
Competition will remain the norm — Possibly increasing even more in outlying areas if Biden can pass a costly housing tax credit.
Things are probably NOT going to get better in the competition department anytime soon. In October, 56% of all offers submitted by Cascade Team Agents and Brokers met competition. November reached 57%, and an unprecedently strong December saw 64% of all listings we brought on or represented Buyers for receive at least 4 offers or more.