Many elements went into creating our current strong seller’s market, but things could shift towards buyers in the future. This year, high buyer demand coupled with low inventory elevated home prices and continues to cause stiff competition when new listings hit the market. Overall, new home construction hasn’t kept pace with demand for the past decade. It didn’t help that the lumber industry was severely affected by the pandemic, driving up home building costs. When you look at all the factors, we are likely to see a seller’s market remain so for much of 2021. But, there are certain aspects that could turn the tides and make it a more favorable time for buyers.
Rising seller confidence
A portion of sellers held off listing during the pandemic due to market uncertainty, job loss or lack of suitable replacement homes to move to. As the economy recovers, more sellers may be willing to list. If mortgage rates rise and home values remain high, buyer demand will cool, and we could see less competition for those looking to buy.
The economy is doing better than expected
Dire post pandemic economic recovery predictions are proving unfounded. In fact, the economy has bounced back so rapidly we are facing a shortage of goods and enough people to fulfill service rolls. Job growth is on the rise, with 850,000 jobs added and unemployment falling to 5.8% in June 2021.
It is a good time to buy (for some buyers)
For some buyers, especially those in a stronger financial position, it is a good time to buy even at a higher price. That is because of historically low interest rates. A high priced home may have the same mortgage payment as a much lower priced home four years ago. Those who can afford to buy homes in 2021 are high-earners and millennials, who made up the largest share of home buyers at 38%.
However, buyers shouldn’t expect things to swing their way to quickly, particularly for first-time home buyer with limited budgets, as home prices remain high, so qualifying may be more difficult. At the beginning of 2021, median home prices were up 10% across most of the nation, the fastest rising pace since 2006, fueled by low mortgage rates and high demand. Home prices are expected to continue to climb throughout 2021, as much as 5-8%.
We may see a rise in inventory this year
Of the 43% of homeowners who said they planned to sell their home in 2020 or 2021, 65% of them delayed or decided not to sell altogether. Of those sellers, 77% say they plan to sell sometime in 2021. This rise in inventory may help to ease the shortage, but it’s more likely to be a slow slog to the end of 2021, rather than a flood in the market.
The inventory crunch might see a bump in an unfortunate way too, as more than a half-million homeowners are projected to face foreclosure in 2021, double the number from 2020. Once foreclosure and forbearance bans are lifted this summer, homeowners affected by job loss and lack of stable income may struggle to keep their homes. Home buyers or investors may be able to find deals on foreclosed homes but should be aware of what they’re buying.
Mortgage rates are likely to stay low for a while
Record-low mortgage rates have hovered below 3% for a 30-year fixed-rate mortgage since October 2020, which is good for buyers. Consumer income and spending is picking up thanks in part to widespread vaccination against COVID-19 and government stimulus and recovery spending plans.
Some economists are predicting mortgage could rise as high as 3.4% by the end of 2021, but that is still a low rate.
Will we see a buyer’s market this year?
It seems likely we will see a bit of a market correction, creating better opportunities for some buyers in 2021. However, market conditions are not likely to swing enough to consider it a buyer’s market. At least not this year.