Homebuyers are getting a lot of mixed messages this year. Interest rates are near record lows, but housing prices are still rising. So should you continue to rent or go ahead and take the plunge to buy? That depends a lot on both your needs and where you live.
You may be wanting more space for home offices, play areas for kids, and more. You may not have to be close to work, which is one reason why there’s a current exodus out of expensive cities like New York City and San Francisco to suburbs or smaller towns. Another reason is cost.
Strong demand and low supply is driving home prices
According to HomebuyingInstitute.com, home prices will almost certainly continue to rise through 2021, primarily due to limited supply and strong demand. Interestingly, the pandemic appeared to fuel the housing market. Realtor.com reported that median home listing prices rose 15.4 percent between January 2020 and January 2021. And, in the 50 largest U.S. metros homes sold 12 days faster in 2021.
Some cities could experience an average level of appreciation this year, while others could rise by double digits. Some housing markets might even level off in 2021. But overall, forecasts point to additional price gains.
Over the past year, some cities have experienced significant price growth that far exceeded the national average. And we will likely see more of that this year, as well. At the same time, the number of homes for sale in January was down 42.6% year over year. That means 443,000 fewer homes for sale which only exacerbates demand.
Inventory levels should rise during the peak buying season
As we head towards the peak home buying season, the demand remains strong but the housing supply still lags behind. Buyers who are currently struggling to find a house are likely to see improvement in the number of listings available to them as more sellers list their houses for the spring buying season. In March 2021, the existing-home sales fell 3.7% from the prior month to a seasonally-adjusted annual rate of 6.01 million.
Mortgage rates to remain low for most of 2021
Mortgage rates are expected to remain near borrower-friendly levels and will help maintain strong housing demand in 2021. Hence, the supply-demand dynamics will continue to push home prices up by 8 percent in 2021 – up from the previously predicted rate of 4.2 percent (FHFA Home Price Index). Another interesting thing is that this higher home price forecast more than diminishes the modestly higher interest rate forecast. Therefore, the mortgage originations are also expected to tick up by 14.5 percent year-over-year in 2021.
Mortgage interest rates hit record lows in January 2021, with nowhere to go but stay the same or go up. You may want to take advantage of that to keep monthly payments low before housing prices rise further.
Meanwhile, some home markets may level off, while others like Austin, Seattle and Tampa are expected to heat up.
Published on 2021-05-04 10:39:28