Welcome to our four-part video series on Real Estate Market Predictions for 2021. Clients always want to know what is the current state of the market, here in Seattle, WA, and where is it going? This forecast uses national data and on-the-ground experience to share what we see happening and where things might go.
If you’re thinking about buying, selling, or investing in real estate – or even if you’re just holding on to what you have – it’s useful to be able to know what is going on in the real estate market, so you have an understanding of how your “moves” are likely to be impacted.
Many Seattle residents have been wondering if we are going to see another real estate market crash like we did in 2008. I think that’s unlikely for the reasons explained in this article. However, the market is going through some very challenging and unusual conditions. So let’s see what this year is likely to have in store.
Be sure to watch all four videos, as they each address a different topic. Then let us know what you think in the comments below, or reach out to us directly with your real estate questions.
Low Interest Rates Will Continue
The data we use to make these national real estate market predictions comes from Core Logic. What is CoreLogic and why are their predictions important to consider?
I’ve been in the real estate industry for 18 years as both a real estate investor, and later I became an agent as well. I eat, sleep and breathe real estate. I live in the Lake Forest Park Neighborhood of North Seattle, near Shoreline, WA right next to the home where I grew up. I know this area and I trust CoreLogic because it’s a leading provider to the government and business of analytics of financial and property data.
This brings us to prediction #1: We will continue to have low interest rates throughout 2021.
Currently interest rates are at record low levels as the Fed pumps money into the economy to offset the negative economic impacts of all the shutdowns this year. CoreLogic believes the Federal Reserve will continue to promote low interest rates throughout 2021. Right now, fixed rate 30-year mortgages are averaging about 2.7% nationwide, which is a record low. Their forecast is that on average, for the whole year, interest rates will be 2.9%. If so, this will have been the first year ever that 30-year fixed rate mortgages have averaged less than 3%. CoreLogic also predicts these low interest rate levels will go into 2022.
More First-Time Home-Buyers Entering The Market
The second Real Estate Market Prediction for the U.S. in 2021 from CoreLogic’s Chief Economist is that there will be more first time home buyers entering the market.
If you are considering buying a home, get our recently updated Buyer’s Guide which will explain in more detail how the current market conditions will impact your home buying experience.
Remember CoreLogic bases their predictions on public data and facts, and being in the industry for almost two decade now, I have come to realize how important real estate market trends and data can be in influencing your home buying, selling or holding experience.
CoreLogic believes that the continued low interest rates will entice renters to become new potential home buyers. It’s an easier transition time for renters to enter the housing market now because the principal and interest rate housing payments on the same priced house would be much lower today than they were a year ago. That 1% decrease in average interest rate could lower a buyer’s monthly payment significantly.
Homeowners and investors may also save cash due to mortgage loan write-offs on taxes. But be sure to check with your own tax advisor on that.
However, the negative part for Seattle home buyers is that with prices going up, down payment requirements will go up as well. You’ll need to have enough cash in hand to cover your down payment as well as closing costs, and still have a monthly reserve. As prices rise, so do cash requirements. Once buyers get in the home it’s great, but initially getting into the home may be a bit more of an initial financial challenge.
Home Prices Will Continue To Rise
The third Real Estate Market Prediction for the U.S. in 2021 from CoreLogic’s Chief Economists is that home prices will continue to go up but not as quickly as what we’ve seen recently.
According to CoreLogic Home Price Index, home prices went up about 7% in 2020. In Seattle, we are seeing very strong numbers, with some homes being bid up 10-20% over asking price right now.
CoreLogic expects a continued growth in home prices during the first half of the year, but feels the appreciation rate may slow down just a bit in the second half of the year, averaging around 3.4% cumulative growth in 2021 in our national index.
INVESTOR ALERT: In areas or communities where the unemployment rate is worse, there could be less appreciation. For example, areas where employment factors rely heavily on travel, hospitality, entertainment and eating out, like Las Vegas or Orlando, have been hit harder by 2020’s economic downturn, so we may actually see a home prices decline in those areas, the homes may not appreciate as fast.
Regarding Foreclosures: It’s important to understand The CARES Act and Forbearance. Mortgage forbearance temporarily pauses mortgage payments to provide relief for individuals struggling financially due to what’s happening globally right now. This is a deferment in payments for up to 12 payments or 360 days. Banks negotiate various ways for their borrowers to pay back those missed loan payments and continue to stay in their home and keep their mortgage on track. Hopefully at the end of the term, most individuals will find that their income has been restored and the’re back to business as usual, however there is the possibility of more distressed sales at the end of their term, which brings up the possibility of more foreclosures.
Many real estate investors are in the business of helping people out by buying foreclosures from home owners directly (so the bank does not foreclose), or buying the REO (Real Estate Owned) from the bank after they have completed the foreclosure process. If you would like more information about this as a home owner or as an investor, please let me know.
Increasing Inventory Levels (We Hope!)
Are we going to see inventory levels go up in 2021, and how will this affect the market?
In my 18 years in the industry, I have never seen inventory levels this low. Ever!! What does that mean for a seller and a buyer? Lower inventory levels cause home prices to go up because there aren’t enough houses for all the buyers who are interested, so buyers who want a home have to pay more in a bidding-war type of scenario, in order to get what they want. This causes homes to increase to higher levels. It’s great for sellers who will get a lot of interest in their homes, but makes it much more difficult for buyers to close on a property.
If you are thinking of selling your home, be sure to download our Seller’s Guilde for a break-down of how current economic conditions are likely to effect your home for sale.
Lately, we’ve had as many as 20-30 offers or more on properties for sale. Which makes it hard for buyers to have their offer chosen, but allows sellers to dictate the terms of the contract that are most favorable to them. They are taking into account factors such as down payment, type of loan, contingencies etc. when they choose their offer, so buyers are having to come in as strong as possible in order to have their offer considered.
Will Baby Boomers Get Us Out Of This?
Here’s the glimmer of hope that CoreLogic holds out as a possible exit-route to this low-inventory supply crunch we’re currently experiencing. Nationwide, the median age of an owner-occupant home owner is about 57 years old. We’ve been told by health professionals that the older you are the more at risk you are with the virus or having very serious complications. So many older Americans have waited to list their homes, this is one of the factors that has led to the lack of inventory.
I believe that inventory levels are going to go up once people feel more comfortable listing their home because they aren’t fearful of getting sick.
Also, CoreLogic predicts the turnover rate – the percent of houses that sell in 2021 – to be higher than the 20-year average turnover rate.
For these reasons we can be optimistic that supply will increase in 2021 and we won’t have so much pressure between buyers looking to get into their home.
There is a lot going on in the real estate market right now for sure. When you contact me, I will give it to you straight and let you know how the game is being played at the moment. You need a skilled and confident agent to help you navigate these choppy waters and I am here to help. Reach out to us using the form at the bottom of the page should you have any real estate questions.