January 8, 2021
What started as an excellent year for the housing market and the economy, 2020, was instantly thrown off by a global pandemic and severe economic downturn. Some industries took massive hits, including food and drink services, such as bars and restaurants, and entertainment providers, like movie theaters and concert venues. But some industries saw an upswing due to COVID-19, including the real estate market, including commercial and residential sectors.
The housing market saw home sales and prices hit decade-plus highs following nearly ten years of lows in just a few months. Based on this upward trend, the housing market is expected to continue its winning streak heading into the new year as seasonal trends normalize.
Here are some other key trends in the housing market predictions that businesses and homeowners can expect to take shape in 2021.
The housing market regained its early-year momentum to finish at fresh highs for home sales. The year 2020 saw home sales coming in at nearly one percent higher than in 2019, thanks to a strong buying season. Moving into this year, home sales activity will slow from frenzied levels, which highlighted underlying housing demand and buying for a spring season many buyers missed last year due to the pandemic. This is known as make-up buying, and it is propelling home purchases into 2021. This demand comes from a healthy portion of Millennials and Generation Z’ers buying their first homes.
As vaccines for the virus become more available to the general public and economic growth reflects the resumption of standard buying patterns, home sales may gain even more energy in the second half of the year.
Although the housing market is on the mend and even doing better than before the pandemic, inventory remains a long-term solution for the market. There was an insufficient number of properties for sale in 2020 due to an estimated shortfall of nearly four million newly built homes opening the year. Surprisingly, the coronavirus didn’t lead to a distressed seller-driven inventory rise as was seen in the previous recession a decade prior. Instead, it further reduced the number of homes available for sale.
In the fall of 2020, the housing market saw more than half a million fewer homes on the market than in 2019. Moving forward, the market can expect to see an improvement in inventory declines continuing through the spring of 2021.
Work-from-home professionals have been around for decades, but with the advent of technology, accessibility, and the ongoing pandemic that forced people to exchange their corporate office for their home office, remote work is here to stay to some degree. But even as most workers will return to their traditional office throughout the year, home sales may see a change. What’s more, many businesses are deciding how to go about new construction projects or future property sales and real estate insurance due to fewer people at the office and potentially less square footage needed in the long-term.
The option to work remotely was a factor in prompting people to buy a home in 2020. This was the situation even when most people already made plans to return to the office in 2021. As remote work continues through this year, and, in some cases permanently, home listings can expect to showcase features that provide a great place to work from home. This includes home offices, Zoom rooms, high-speed internet capability, quiet yards, and proximity to places like coffee shops, libraries, bars, and co-working spaces.
Millennials & Gen-Z
As mentioned above, those born between 1980 and 2000 are finally ready to make their first home purchase and shape the housing market as they take an even larger role. In early 2020, younger prospective homebuyers, such as Millennials and Gen Z’ers, were putting down smaller down payments and taking on larger mortgage debts to take advantage of low rates despite rising home prices. This trend may continue as increasing home prices require larger upfront down payments and a more significant ongoing monthly payment due to the end of rate declines.
Early in the pandemic, there was some concern around temporary income losses that could prove to be incredibly disruptive to younger buyers’ plans for homeownership, as these were the groups expected to face disruptions with their income.
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