12/29/2020
The local housing market is going to be HOT in 2021. Here is the forecast:
Active Inventory – the year will begin with around 2,500 homes, the lowest start by far since tracking began in 2004. It will be 21% less than the 3,161 start to 2013. With very few available homes to purchase, housing will be extremely hot on January 1. The theme for 2021 will be not enough homes for buyers to purchase. Instead, they will all be in escrow. Expect the active inventory to peak around August between 5,000 to 5,500 homes.
Demand – with an anemic inventory and record low mortgage rates, buyer demand will be extremely strong from the start of the year through the Summer Market. With tremendous buyer competition, buyers will be willing to stretch slightly in price compared to the most recent sale; so, expect appreciation around 6 to 8% for the year. Demand will be at its strongest, and most appreciation will occur from January through July, and then will downshift during the Autumn and Holiday Markets.
Housing Cycle - the housing market will follow a normal housing cycle. The strongest demand coupled with plenty of fresh inventory will occur during the Spring Market. This will be followed by slightly less demand and a continued new supply of homes in the Summer Market. From there, demand will drop further along with fewer homes entering the fray in the Autumn Market. Finally, all the distractions of the Holiday Market will be punctuated with the lowest demand of the year and few homeowners opting to sell.
Interest Rates – look for mortgage rates to continue to remain at record low levels until the current Coronavirus wave diminishes. Expect rates to rise from the record low levels with positive vaccine and COVID-19 news, congressional relief and stimulus packages, and positive job reports and economic news. Long term rates are driven by economic fundamentals and headline risks. Negative economic headlines drive rates lower and positive economic headlines drive them higher. The year 2020 was filled with more than its fair share of negative news. Mortgage rates will rise in 2021, climbing from their current low of 2.66% to 3.5% by year’s end.
The bottom line: 2021 will continue where the second half of 2020 left off, HOT. It will be a Hot Seller’s Market from the start of the year through the Summer Market. Multiple offers and bidding wars will be the norm for homes priced below $1.25 million. Once again, the market will heavily favor sellers and buyers will have to pack their patience to isolate their piece of the American Dream and take advantage of record low mortgage rates. From mid-August on, the beginning of the Autumn Market, housing will evolve into a slight Seller’s Market, where sellers still get to call more of the shots, but home values do not change as much. Buyers will be willing to stretch prices from January through July, if sellers do not overprice, but cautiously pricing will be even more important during the second half of the year.
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Happy New Year!
