From Mortgage Rates to Home Prices – 8 Predictions for 2121
Following a year when home equity wealth reached an all-time high, while up to 14 million Americans received a temporary pause from evictions, 2021 will continue some housing trends from 2020. Others will fade away. According to experts, some new ones will pop up too.
Home prices and sales likely will maintain their 2020 momentum, while refinances should taper off as mortgage rates move off historical lows. The ramifications of coronavirus evictions could provide new housing stock, as builders ramp up activity in the now-hot suburbs.
Here’s what else to expect from housing this year.
Home prices will go up. In 2020, median listing prices grew 13.3% (according to realtor.com) while the median existing home price for all housing types in November was $310,800, up 14.6% from the year before, according to recent statistics from the National Association of Realtors. Prices increased in every region.
Experts forecast prices again will stay on an upward track. “As we wrapped up 2020, housing demand continued to be strong and asking prices continued to post double-digit percent gains over last year. This suggests additional increases are ahead, according to the Case-Shiller Index. Looking ahead to 2021, the economy will be kept in recovery mode thanks to the recent stimulus bill and additional construction of affordable homes in the coming year.” said Danielle Hale, Chief Economist at Realtor.com.
Buyers will eye foreclosed properties. A new source of properties may pop up that interests first-time homebuyers and investors: foreclosed homes for sale. “When the forbearance lifts a lot of investors and first-time homebuyers will be able to buy these properties, but prices won’t be similar to 2008 levels,” said Daryl Fairweather, Chief Economist at Redfin. Here’s what to do if you plan on buying a home in 2021.
The CARES Act passed in March 2020 required lenders to postpone mortgage payments up to 180 days to homeowners who experienced a pandemic-induced financial hardship. Homeowners also had the option to receive another 180 days extension if they qualified.
As of January 2021, there are about 2.7 million homeowners in forbearance plans, according to the MBA. If these homeowners continue to struggle after their forbearance plans end, they may end up losing their homes.
The ramifications of coronavirus evictions will provide new housing stock, as builders ramp up activity in the now – hot suburbs.
Renters will need more help. Protections for struggling renters are set to expire this year. The federal eviction moratorium has been extended until the end of January (March 31st in Nevada), while renters in multifamily homes backed by government agencies have eviction protections until the end of March. Still, Congress will need to continue to address the issue of rental evictions, experts said.
Home prices will go up. In 2020, median listing prices grew 13.3%, according to Realtor.com, a real estate listing site, while the median existing-home price for all housing types in November was $310,800, up 14.6% from year before, according to the most recent statistics from the National Association of Realtors. Prices increased in every region. Read more: Here’s what to do if you plan to buy a house in 2021.
Experts forecast prices again will stay on an upward track.
“As we wrapped up , housing demand continued to be strong, and asking prices continued to post double-digit percent gains over last year, suggesting additional increases are ahead for the Case-Shiller Index,” said Danielle Hale, chief economist at Realtor.com. “Looking ahead to 2021, the economy will be kept in recovery mode thanks to the recent stimulus bill and additional construction of affordable homes in the coming year.”
Housing sales growth will be largest since 1980s, even that won’t dampen home sales. In fact, growth in home sales in 2021 could be the largest since the 1980s, according to Matthew Speakman, economist at Zillow.com. “The swell of millennial buyers — with the also enormous Gen Z cohort right behind them — aging into their prime home-buying years and looking to enter the market should also keep demand firm and prompt steady growth in household formation,” Speakman said.
Builders will flock to suburbs. As privately owned housing units in permit areas saw a 14% uptick year-over year in November 2020, according to New Residential Construction data from the Census Bureau, experts expressed larger optimism for housing construction in 2021.
“It’s a really good year for building and I think working from home is going to fuel more residential construction,” Fairweather said. “The strongest demand is single family homes in suburban and rural areas since it’s cheaper for builders and easier to get permits.”
Refinance volume will decrease. Historically low rates fueled a refinance boom last year. The average 30-fixed year mortgage rate hit a record low 16 times in 2020. “Refinancing volume should decrease in 2021 largely because everybody already refinanced due to these historically low rates,” said Patrick Boyaggi, CEO of Own Up, a mortgage technology company. “When this vaccine comes into play, interest rates are likely to go up rather than down.”
Mortgage rates will inch slightly higher. After the 30-fixed year mortgage rate reached 16 record lows last year, rates ended the year at 2.67%, according to Freddie Mac, a government sponsored enterprise that backs millions of mortgages. They dipped slightly lower in the first week of January.
Last year, banks such as JPMorgan Chase raised its minimum credit score to 700 and required a 20% down payment for most mortgages to hedge against consumer defaults and forbearances during the pandemic. But experts don’t see tighter credit preventing new homebuyers from entering the market. They also expect the so-called QM patch will remain intact for at least the early part of the year.
This article taken in part from Brad Malkin, Noble Home Loans – President