Now that we are a month into the new year, what should we expect to see regarding market trends going forward? This is a burning question for many current and future homeowners, so let’s take a further look into 2021.
Continued Home Equity Growth
Since 2019, we have experienced a steady increase in homeowner equity which is expected to continue through the new year. Research provided by Corelogic, suggests that the average American homeowner saw an increase of $17,000 in home equity growth in 2020. In Ohio, that figure came out to be around $13,000. Many housing and economic experts believe this trend will continue in 2021, signaling financial stability for homeowners amid economic uncertainty. As buyer demand continues to increase and interest rates remain historically low, home values will continue to rise. While it is risky to make predictions, provided any unforeseen circumstances, we believe homeowners will see an increase in home values somewhere between 4-8%. As homeowners continue to make life transitions, equity growth shields against financial difficulties and protects against rising foreclosure rates.
Current market conditions are complex, with historic demand and societal changes contributing to increased home prices. As values continue to rise, low interest rates are important in maintaining balance and home affordability. We believe that interest rates will remain unchanged throughout the 1st half of 2021 with a potential increase during the 2nd half. Should an increase take effect, it is expected to be minor. Considering this information, mortgage activity will continue to flourish in both purchase and refinanced loans. We cannot stress enough how fortunate we are to be experiencing rates at this level. Whether you are considering a purchase or refinance, it’s highly recommended that you seek the advice of a real estate professional to evaluate your options.
The global pandemic has put a damper on urban real estate as homeowners are not as concerned with commute times while working remotely. Over the past couple of decades, urban living was desired for its access to public transportation and walkable cities offering a vibrant lifestyle. The pandemic has created a shift in the meaning of home and the lifestyles homeowners now seek. We are experiencing a large push towards suburban and rural living to meet these new desires. While urban real estate may experience a slowdown, it is not expected to last long. Cities will continue adapting to changes in public health and develop state of the art infrastructure which will attract commerce, education, and events appealing to those seeking a vibrant lifestyle.
Inventory, Inventory, Inventory… where are you? I am sure you all know inventory is running on fumes. While we expect to see more of the same, there is some hope for the second half of the year. Assuming the distribution of the Covid19 vaccines remain fluid and without disruption, we may see some of the baby boomers act upon their growing real estate needs. Should this happen, it would free up some existing inventory, specifically in the move up buyer pool. This, in turn, would lead to increased inventory in the first-time homebuyer market as older millennials look for larger homes with more space. We are also keeping an eye on the new construction market. As materials become more accessible, this could speed up building time frames and allow for more newly built homes. If you are currently in the market, the key to success is patience and perseverance.
The stay-at-home orders and social distancing requirements challenged the real estate industry last year. It created a sense of urgency in developing new ways to conduct business and we anticipate seeing more of this through the expansion of digital services. While this may be a growing trend, it will take some time as we learn how to protect the integrity of real estate transactions from cybercrime and fraudulent acts. The best advice we can give regarding digital transactions is to remain diligent and work closely with your real estate professionals to ensure your privacy and assets are protected.