Predictions: What to Expect in the 2021 Real Estate Market
At this time last year, experts were predicting the 2020 housing market would see relatively flat home price growth, tight inventory for first-time buyers, and an increase in mortgage rates. We all now know what happened next: The COVID pandemic. Though there was an initial pause for homebuyers in mid-March to mid-April as would-be sellers decided what to do next and some homeowners opted to refinance instead of list their home after rates hit new lows, the housing market ended up hotter than ever. Demand outpaced inventory, leading to higher prices state-wide.
While 2020 was a lesson in expecting the unexpected, the housing market has adapted to the “new normal.” The trends we’ve seen over the past year, along with increasing certainty regarding the availability of a COVID vaccine, provides data points for making predictions for the 2021 housing market. Here’s what you can expect to see, whether you are buying or selling your home in 2021:
Home values (and prices) will continue to rise — for the time being
According to research by property analytics firm CoreLogic, national home prices hit a six-year high in September with a year-over-year increase of 6.7%.
However, slower economic growth is expected to affect home prices by next September, resulting in lower asking prices. Also, anyone who put off selling in spring 2020 for spring 2021 could increase inventory. Both of these variables could flatten housing price growth, but only time will tell.
What to do about it
If you’re planning to sell, signs are pointing to listing as early as you can. If you’re interested in buying your first place, you may have more to choose from and less competition if you wait a bit longer, but you could also miss the record-low interest rates currently available.
There’s going to be more construction happening
When COVID hit, many construction projects ended up on hold. This affected new construction inventory, along with mixed-use residential-commercial projects designed to revitalize many neighborhoods. Housing starts began picking up in October, which means that the next year will pick up where plans left off in 2020.
What to do about it
New construction tends to fall into two categories: luxury and 55+ developments. If your home is on the higher-end or in a popular area and you plan to sell this year, new construction presents some competition. Let's sit down to get up to speed on planned new construction in your area and develop a strategy if it could impact your potential sale. It’s also worth discussing if there are big commercial projects still in the works (for instance, high-end shopping centers or interesting event spaces designed to revitalize your area). If these projects are still planned, it only makes your property more attractive to potential buyers.
If you’re more concerned about buying, this news simply gives you more options to consider if you prefer new construction housing.
The remote workplace might be here to stay
Though some industries plan on returning to their offices, many more are realizing that a virtual workforce is more workable (and presents many savings for the company). If you’re located near office parks, downtown cores where trendy start-ups normally flourish, and other areas once prized for commutability, there may be less demand if these companies go fully remote. If you’re in a city near once-thriving shopping areas, the economic slowdown may lead to many retailers exiting the area. Possible economic relief could stem these outcomes or could lead to new businesses relocating to the area. Homes located close to outdoor recreation options may be considered more attractive than those located near offices.
With the remote workforce's freedom to move to areas far from their corporate offices, we may see a boom in rural areas known for their natural beauty and outdoor recreation options as well as affordable suburban areas adjacent to cities.
What to do about it
The remote workforce also has changed the demands many potential buyers have. Now, home offices are a higher priority than dining rooms, guest rooms, and other entertaining-oriented features.
The at-home workforce has also adapted to fulfilling their free time at home. Indoors, a media center helps fill downtime and entertain kids. If you have an outdoor space, style it with the care you’d take for interior spaces. A fire pit, comfy chairs, outdoor kitchens, outdoor media centers and pools are going to be a plus for buyers who have grown too used to quarantine.
There’s no predicting where remote workers will move, as it’s all up to the individual. But the Rochester area is a fantastic suburban area with great schools and not too far from Detroit, so don't be surprised if you find yourself with some new neighbors. The marketing plan around selling your home should include resources for those moving in from out-of-the-area.
For potential buyers, if you’re looking for a place that offers great community, schools, and convenient location, you can't beat the Rochester area. However, there's currently a lot of competition, so be prepared to act quickly and make solid, even over asking, offers!