If someone told you in December 2019 that by May 2020, the US economy will be in the worst shape since the Great Recession, what would you say? That it’s plausible or that they’re crazy? Probably the latter.
And yet, here we are. It’s December 2020, and the crisis caused by the coronavirus pandemic is still wreaking havoc in the world. Since the COVID-19 outbreak, almost 100,000 businesses have closed down in the US alone.
In April, the unemployment rate hit 14.7 percent (the highest in history). But even despite the decrease to 6.7 percent in November, it’s far from the pre-pandemic level.
However, there’s one industry that seems to have gone through the coronavirus crisis relatively unharmed. We’re talking about real estate.
Sure, the house sales dropped significantly during the spring months, but they’ve been increasing since then. Of course, real estate agents’ role has been minimized, with sites like Highest Cash Offer or Zillow becoming the primary source of information for potential buyers.
But as the year is slowly coming to an end, the housing market is starting to prepare for 2021. How will the current recession impact it, though? Keep reading to find out more.
Home Prices & Mortgage Rates
The first thing you notice when looking at the pandemic housing market is how significantly the prices have increased. Listing prices have been growing continuously for the last few months, and according to various experts, that trend will continue in 2021.
In fact, Zillow predicts a 7 percent rise between September 2020 and September 2021. Realtor.com, on the other hand, believes that home prices are expected to hit all-time highs, with housing inventory making a slow and steady comeback.
And what about mortgage rates? Well, various real estate investors predict that they’ll rise again after the 2020 decrease. Rates are expected to hit 3,4 % by the end of 2021, bringing them much closer to the pre-pandemic level.
New and Existing Home Sales
Surprisingly, despite a significant increase in housing prices, the demand for real estate has skyrocketed in 2020. According to Census Bureau Data, new home sales jumped by 43 % in August, compared to 2019.
But existing house sales also rose despite the decline in spring. Admittedly their increase wasn’t as significant as new homes, with a 24.7 % rise. Nevertheless, these numbers show that the housing industry has been coping well during the corona crisis.
And what about the upcoming year?
The experts expect the housing market to cool down a little bit during the December/January period. It should lead to lower estate prices. However, they’ll remain above the pre-pandemic level.
What will it mean for the real estate market? Experts agree that sales should remain above the levels they were before the coronavirus outbreak.
Foreign Investors
Despite the increase in national sales, the housing market has recorded the lowest number of foreign real estate investors since 2011. In 2020, international buyers bought $74 billion worth of US residential estate.
It’s a drop from $77.9 billion from a year before and $121 billion back in 2018.
The reason, of course, is a coronavirus. What’s more, according to experts, this trend is likely to get even worse. How will it impact the housing market?
Firstly, it’s bad news for sellers, as international investors tend to drive home prices up. However, it means lower buyer competition, which should please potential buyers.
2021 Real Estate Trends
2020 has turned out to be quite a good year for the housing market. The sales pace has increased despite the higher approximate home listing price. What’s more, it looks like these trends should stay with us for the upcoming year.
According to experts, some things will shape the 2021 real estate market. Below, more about the housing market forecast and trends that will impact it the most next year.
Housing Demand
The first thing we should expect from 2021 is increased buyer demand. Well, it depends where. 2020 showed the regions that struggle the most are the ones with big cities, such as the Northeast with New York and Boston.
Besides larger agglomerations, the country is doing fine, especially in the suburb and rural areas. And there are plenty of reasons why people will continue to buy houses in 2021.
First of all, due to coronavirus, people seek isolated and more comfortable homes. They don’t want to live in crowded cities as they’re the most dangerous in times of the pandemic.
Secondly, mortgage rates are low. Moreover, despite their expected rise in 2021, they’ll still be under the pre-pandemic level. It means more affordable estates and profitable mortgage loans.
And last but not least, we can expect an increased number of new housing investments next year. It means higher supply and lower prices, which should boost the demand even more.
New Technologies
Technology and the internet have been transforming how we sell, buy, and manage homes for quite some time now. Nowadays, you purchase a house without even having to inspect it in person, as you can do everything via an app or a website.
While such apps’ popularity increased, the coronavirus outbreak turned them into the people’s favorite housing market source of information. What’s more, it looks like that it’s the trend that won’t only shape 2021, but the future in general.
But of course, if you miss shaking hands with realtors and property managers after a successful transaction, you can still do it the old-fashioned way.
Final Note
The real estate industry has been in fantastic shape so far this year. Despite its minor decline during spring, house prices have increased, followed by the higher demand and sales.
What’s more, the housing market forecast for the upcoming year also remains optimistic. Various experts and investors believe that the industry will become even more profitable, mostly because millennials are now the largest US population.
According to the Realtor.com survey, 63 % of millennials plan on buying a home within the upcoming year.
With all that information, we can now answer the question given in the title. Contrary to early expectations and other industries, the housing market will only benefit from the corona crisis.
