As the final days of 2020 come to an end, many across the country are eager to close out this chapter and ring in the new year. 2021 is a year of many unknowns after surprises around every corner of 2020. One thing is sure. The housing market is HOT and has remained hot since the early days of the pandemic, fueled by historically low rates and a shift in lifestyles. But, will the housing market remain competitive in 2021?
Here to give us an understanding of what we can expect is Robert Brown, Loan Officer at Rock Mortgage.
How did 2020 impact the housing market, and how will that affect the market in 2021?
The seasonal pattern of home sales was thrown off by coronavirus as we tried to slow the spread. These measures were implemented just before summer, normally the best time of year for sellers to list a home. Historically, we see an acceleration of the market because it is easier for families to move in summer months. The housing inventory was already low going into the pandemic. It was low in 2019, too. It has only been made worse by an influx of people looking for more space while taking advantage of historically low rates. Folks can get a lot more living space for their money in Arkansas than in California. With low inventory and eager buyers, home sale volume skyrocketed and time on market dropped to new lows. 2020 has been a very strong home buying market, and I expect it to last into 2021. It is hard to predict just for how long, though.
Do you expect the cost of homes to rise in 2021?
We’ve heard many reports of bidding wars in 2020. That can oftentimes lead to paying above asking price, and driving up the price of a home. A problem some buyers run into is with the appraisal. Sometimes the appraisal comes back lower than the offer price, making it harder to finance. It is so important to work with the right mortgage lender to increase your chances of closing if you find yourself in this situation. The market hasn’t shown signs of slowing, so if you are considering buying, I suggest acting sooner rather than later before home prices rise. A good first step is getting pre-approved with a mortgage lender.
Are Millenials playing a big role in the market?
Buyers are coming from everywhere because of the low rates. Just last year, we were talking about how Millennials were finally buying homes. We are still seeing an influx of first-time Millennial buyers, but also an influx of trade-up buyers. We haven’t been thinking about Gen-Z, but with the low rates, they are looking to buy their first-home. What it comes down to is that milestone buyers –those looking to buy their first home, those looking to upgrade for their families, those looking to downgrade for retirement – are all taking advantage of historically low rates.
Do you expect to see lasting effects of stay-at-home Covid restrictions on the housing market in 2021?
I, like everyone else, cannot wait for the pandemic to end and for life to get back to normal. But, there are some that think that we are never going to return to how life was exactly. Lifestyles have changed. I expect that families will still want more room and space to make memories and homestead. Even something like working from home … this isn’t an entirely new concept. In fact, as long ago as 2018, roughly one-quarter of workers worked at home, up from just 15 percent in 2001. The pandemic has just accelerated this shift. It’s a win-win for a lot of businesses, and I’ve heard of many companies opting for permanent remote-work. Technology has made that possible. Buyers will be looking for home offices, Zoom rooms, tech-forward homes, and outdoor, backyard oases.
What other shifts in buying patterns do you expect in 2021?
Something that has been uncommon this year that I expect to persist into 2021 is the influx of investment property purchases. As more and more people opt to escape their four walls of their home, they are looking to retreat within driving distance of their house. Vacation homes have been moving extremely quickly. The rationale is that the nightly rental market is very hot right now because consumers feel safer driving than with air travel and in an Airbnb or VBRO instead of a hotel. I keep hearing about Zoom towns – these are sleepy, low population towns in beautiful places where folks can retreat with nice scenery and conduct their business and work remotely. In Arkansas, we’ve seen an influx of interest in the Ozark Mountains – Ponca, for example, and towns like Hot Springs.
If someone is interested in acting on these low rates, what is the first thing they should do?
My first piece of advice would be to really understand what you are looking for and identify your must-haves and location. Then assemble your team to help you act quickly. Partner with a Realtor that is an expert in what you are looking for. Find the right mortgage lender and get pre-approved. That will tell you your budget and what your maximum offer can be. Be prepared to act quickly, because properties are not staying on the market long.
For more information, visit www.rockmortgagelending.com or call 479.321.3355.