Housing Market Predictions for 2021 [Housing Predictions Explained]

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Thinking about buying a property? Now might be the perfect time to take the leap and buy a home. The increase of remote work and low mortgage rates have provoked interest in buying homes, but the COVID-19 pandemic has caused uncertainty among those who are hesitant to list their properties or invest in the housing market. Before buying a home, consider these six housing market predictions for 2021.

Housing Market Predictions for 2021

Experts have analyzed the state of the housing market and have come up with several predictions based on what is currently happening in the market. Mortgage rates are at an all-time low at 2.66%, and inventory is also low, which boosts interest in buying property. Even if this doesn’t paint the rosiest picture, predictions for the housing market in 2021 have it moving in a positive direction.

Low Mortgage Rates

The lowest recorded mortgage rate in history (2.2%) was recorded in January 2021. Although the rate has been steadily rising throughout 2021, experts say that it will not increase higher than 3.4% for the remainder of the year, which is still a very good rate. The low mortgage rates are a result of the COVID-19 pandemic—the main topic in housing market news. Even though the economy has been badly affected by the pandemic, low-interest rates will likely remain and, therefore, be instrumental in the economy bouncing back.

If you’re thinking about home buying in the current housing market, you might want to move quickly and apply for a mortgage, locking in great rates for the next 30 years. Unlike lending practices previous to the Great Recession of 2008, lenders now adhere to stricter standards. For instance, it might be difficult to get approved for a loan if you’re unemployed or don’t have a stable income.

NOTE: Even those that don’t have stable income can become homeowners. You can learn how to become a first-time homebuyer with bad credit here.

Expanding Inventory

The pandemic has significantly altered all spheres of life, and the housing market wasn’t spared. The global pandemic caused great hesitancy in real estate property listings, due to social contact regulations, which resulted in a lack of inventory. Buyers, however, fearing a real estate bubble, rushed to purchase homes. Predictions declare a good future for an expanding inventory:

More People Vaccinated

This allows home sellers to show their houses. With increasing vaccination rates, it’s expected that more people will be interested in home selling: listing their properties and opening their homes to prospective buyers.

Post-Pandemic Listings

Such listings will expand inventory. More homes will be available for sale and match the demand of housing market predictions for 2021. With this in mind, a new seller might be interested in knowing how to do an open house.

New Construction

Although construction in the US has been limited in the past decade, it’s beginning to pick up. In 2010, fewer homes were built in the US than in any other decade since the 1960s. But new properties are on the rise, especially in suburban areas, as more people are looking to relocate from urban centers. The newly constructed properties will be added to the already expanding inventory and housing price forecasts propose stable, reasonable prices.

NOTE: During the pandemic, the average time to sell a house significantly decreased from roughly 70 days to 25.

Increased Prices

Housing market predictions 2021 say that despite the low mortgage rates, real estate prices are still high and will probably continue to accelerate at a slow, but steady pace. At the end-2020, the median sales price for a new home in the US amounted to $355,900. Potential buyers should be aware that median sale prices are expected to rise by 5.7% in 2021.

Supply and Demand

Have to be factored in. The current real estate market trends revolve around the pandemic, and there is a demand at record levels for suburban homes consisting of office space. The supply of this type of property cannot meet the demand on the current market, causing prices of available property to surge. Another practice that contributes to the surge in median home prices is payments over the asking price. (100% of homes sold for their listed prices in 2021.)

New Construction

Reassures buyers that prices will rise but not as much as some fear. Housing market projections point to newly-built properties that will soon be available on the market and make up for a large part of real estate inventory. This additional number of properties will keep prices in check and won’t allow for sky-high property costs.

NOTE: Even if you are pre-approved for a mortgage loan, you still have to make a down payment. Check out the average down payment on a house here.

Millennials and the Housing Market

What may be the biggest housing market news this year is that a staggering 54% of first-time homebuyers are millennials.

  • The average buyer’s median age is 33, which is also the average age of a millennial buyer in 2021. Most first-time home sales are completed with this age group, as well as among the aging millennial population (35 – 40 year-olds). Homeownership has steadily increased over the past five years, with 42% of millennials becoming homeowners at 30 years of age. You can look up real estate statistics about millennial generation buyers to get a clearer picture.
  • Millennials constitute a large portion of the job market and have immense buying power—45 million people in the US between 30 and 40 years old are looking to purchase their first home. The real estate market forecast asserts that the numbers will increase as the younger millennial population (nearing 30 years old) is beginning to think about buying homes. The majority of the millennial population is employed with a steady income, which, in combination with the percentage of the US population, makes millennials powerful buyers.
NOTE: Millennial statistics show that the 2021 housing market is more hospitable to the millennial generation, but they are still considered unqualified buyers since many of them still can’t afford to save enough money to make a down payment—18% of them said that they plan to permanently rent.

Lending Standards Remain High

Many are concerned about a possible housing market crash in 2021, but this seems unlikely, as lending standards are much higher today than they were before 2007, when standards were extremely loose—causing the market to crash, leading to one of the greatest recessions in history.

Not Everyone Will Be Able to Obtain a Loan

Lenders are now more careful in approving loans—not granting risky loans to the unemployed or to those who don’t have a steady source of income.

NINJA (No Income, No Job, and No Assets)

Loans are no longer granted in order to prevent another devastating market crash. A NINJA loan (popular prior to the 2008 financial crisis) was extended to borrowers who did not need to verify their ability to repay the loan. Mortgage applicants are now thoroughly vetted before receiving approval, and numerous applicants are rejected based on strict criteria.

NOTE: Even if you have bad credit, and you’re worried that you won’t be approved for a loan, don’t give up. There are mortgage lenders who deal with bad credit that can help.

Market Conditions Balanced

Many feel uncertain about real estate market predictions, fearing that a market imbalance might ensue because of the disparity between supply and demand. The predicted increase in supply, however, will help adjust property prices, and new options for buyers will arise.

Bidding Wars

Were caused by the ‘house on sale shortage’, as many buyers competed for the same property. These wars were destined to come to an end, with buyers now competing for many available properties. Not only will the number of properties continue to increase, but buyers won’t be forced to pay over asking prices to secure their homes. The majority of properties on the market will sell for at least a close-to-list price.

The Correlation Between Inventory, Prices, and Demand

Will finally reach a balance2020 was a seller’s market, with more demand than the market could supply. But it looks like 2021 will manage to achieve a balanced market. Real estate price trends will not undergo any significant changes.

NOTE: Sellers often don’t know if their property is attractive to buyers. Check out the hottest real estate markets and find out if your property can be listed there.

Key Takeaways

Mortgage rates in the US are at a historic low.
Vaccination and new construction will result in increases in inventory.
Prices will rise, but demand will continue at a steady pace.
Millennials comprise the largest number of new homeowners.
Lending standards will be controlled at the highest level.
Market conditions will be balanced.

Will the Housing Market Crash?

Is the housing market going to crash? Although it’s impossible to be 100% sure with everything happening in the market, according to market experts, the market will not crash in 2021 or the near future.

  • Memories of the Great Recession have some scared of a market crash. But the scenario today is quite different than it was in 2008. Creditors and lenders are not granting loans as they did in 2008; they now adhere to strict criteria that ensure the market’s stability. If you’re still unconvinced, you can consider conducting your own real estate market analysis.
  • Is the housing market going to crash in 2021? The chances for a real estate market crash in 2021 are slim to none. After analyzing mortgage rates, lending practices, steady prices, and the balanced market, the answer to this question is a resounding NO.
NOTE: Realtors and real estate agents are turning to real estate lead generation companies to secure better property leads in an extremely competitive market.

Conclusion

The housing market forecast 2021 affirms that mortgage rates will remain at an all-time low and inventory will expand, creating a record-breaking housing market. Prices might slightly increase, but a market balance will be achieved in 2021, and property will still be affordable. Housing market predictions declare that there won’t be a market crash in 2021. You can then list and buy property, worry-free—at least until the end of the year.

FAQ

When did the housing market crash?

The housing market crash happened in 2008, due to the crashing of the stock market—a consequence of multiple loans given to those who couldn’t afford them. The crash drove up housing prices to the point where most people couldn’t afford to buy a home.

Will house prices go down in 2021?

It’s highly unlikely that the prices of real estate will decrease in 2021. On the contrary, there are predictions that prices will slightly increase—or in the best-case scenario, they’ll remain the same.

When will it be a buyer’s market?

The year 2021 is considered a seller’s market because there is still a lack of inventory. But the introduction of new property might cause changes to the market. Housing market predictions for 2021 remain positive but not too inclined towards buyers. The next year, however, might prove to be a different story.

Are we in a housing bubble?

The majority of market experts agree that the US housing market is not in a bubble at present, despite some of the highest property prices in history. A bubble can develop in the housing market in 2021, but it seems highly unlikely.

ABOUT AUTHOR

Alex is an IT wizz gone SEO gone fire-juggler. We’re not even joking. When he isn’t researching why one personal loan is better than the other and which piece of hardware you should buy next, he’s rollerblading or selling homes (because he does that, too, the smarty-pants).

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