Buying or selling a home in 2020 certainly looked a bit different than usual due to a global pandemic, government-mandated social distancing, and record-high rates of unemployment. But 2020 has taught us different isn’t always a bad thing, at least in the world of real estate.
Here’s what we’ve learned from 2020’s unique challenges and what we can expect from the housing market as we move into a new year.
2020’s Housing Market Highlights
While the challenges of 2020 may have temporarily slowed the real estate market, they didn’t stop it. In fact, home sales are poised to reach 5.52 million according to the National Association of REALTORS® (NAR), the highest annual mark since 2006. Here are three factors that contributed to 2020’s real estate boom.
Low mortgage rates: Record low mortgage rates worked favorably for both first-time homebuyers and current homeowners and helped to offset the overall increase in home prices. Nadia Evangelou, a research economist with NAR noted, “These ultra-low mortgage rates significantly lower mortgage payments, making housing more affordable than a year earlier in many areas.”
The surge of remote work: One of the biggest contributing factors of home buying trends in 2020? The rise of remote work. Based on numbers from the Bureau of Labor Statistics and NAR’s 2020 Consensus Forecast, the percentage of people working from home has jumped from 7% to 21%.
Remote work has changed how people shop for homes. Homebuyers are still looking for an open floor plan but are prioritizing flexible living spaces that include dedicated home offices. Also moving up the list of desirables is considerable outdoor space.
And while location is still central in the decision-making process, without the need to be near a physical office, people have expanded their home searches away from big cities. “Locally, we’re seeing homebuyers worry less about being close to public transportation and more about local neighborhood amenities like parks, restaurants, and schools,” noted the Zimmerman Group agent Kelly Boenzi.
Increased comfort with technology: By necessity, many of the processes we use in our daily life have been moved online. Real estate proceedings were no exception. Realtors and mortgage companies adapted quickly to the pandemic’s restrictions and could offer remote options like virtual tours and remote online notarization for buyers and sellers early in the pandemic. These adaptations kept the market moving.
2021’s Housing Market Predictions
The housing market has emerged from 2020 despite considerable challenges. The trends that kept real estate moving in 2020 are likely to be what propels it forward in 2021.
Home sales will hold steady: Experts are predicting home sales to continue rising in 2021. Danielle Hale, chief economist at realtor.com told Forbes she expects sales to grow 7%. This increase in sales will likely be driven by mortgage rates staying at or below 3%.
Additionally, unemployment rates are expected to fall, meaning Americans who had previously delayed moving due to job loss may now be ready to get back into the game.
The market will continue to favor sellers: COVID-19 has increased the desire for single-family homes. With limited supply and high demand, a strong seller’s market has emerged. Experts like Todd Teta, chief product officer at ATTOM Data Solutions, predict that while home prices will remain high throughout the beginning of the year, there is hope for buyers toward the end of the year when national economic conditions may catch up with the real estate market.
Millennials may take advantage of older generations exiting large cities: One unexpected outcome of 2020’s unique real estate market is disproportionately affordable condo prices. Chicago Agent Magazine reports, “In Chicago, single-family homes sold for an average of 23.3% more than condos in October.” So, while pre-pandemic, it may have been difficult to find an affordable condo in Chicago, these units are now a relative value.
Redfin’s chief economist Daryl Fairweather told Chicago Agent Magazine, “Families are fleeing cities searching for more space in the suburbs, which has presented an opportunity for millennials who are looking to become homeowners but don’t need extra bedrooms or a backyard.”
You’ve likely heard comparisons between today’s real estate market conditions and those that preceded the 2008 real estate market crash. While the parallel is easy to draw, there are a few key factors that should not only prevent the market from crashing but also make the real estate market a key factor in the nation’s economic recovery.
Megan Ryan, an agent with the Zimmerman Group noted, “I see the 2021 housing market continuing to boom. We’re no longer dealing with the deep flaws in the lending system like we were in 2008.” She continued, “The pandemic has triggered a renewed interest in home improvement and the work created around those projects will help create jobs and further fuel the economy.”
This pandemic has caused many Americans to reevaluate their priorities. And time and again, our homes and how we live in them rise to the top of the list.
