Crash or BOOM? A Look into the 2021 Housing Market
Here is your 2020 Real Estate and Mortgage YEAR IN REVIEW. Before we discuss what we think is going to happen in 2021, first let’s recap what happened in the housing market in 2020. Then we’ll take a look at the crystal ball and give an idea of what we think is going to happen in 2021. Full Disclaimer: I know I said we’re going to look at a crystal ball, but there’s no such thing, none of us really know what’s going to happen next year. In fact I think we would all agree that there’s more uncertainty right now then maybe we’ve seen ever before, certainly in my lifetime.
We’re going to jump right in the first thing I want to talk about is a year-over-year review of some of the different data points we follow. The first one is mortgage rates. Next, let’s look at home prices. Home prices in the year 2020 for the most part rose somewhere between 5 and 8 percent from 2019, and that’s HUGE. Pre-covid the housing market was doing really well, and only just a small lapse right when Covid first hit. Most states experienced the lockdown, but then what happened was mortgage rates went down and there was a pent-up demand of home buyers jumping into the market. When they were finally able to go out and see homes after the lockdown, we saw a big surge in that inventory being bought up quickly, and raising the price of homes. As of right now in the month of December 2020, we’ve seen about a 28% increase in purchase applications from this time in 2019.
🔮 2021 Predictions
What does the future housing and mortgage market look like in 2021? I’ve spoken with some very forward thinking thought leaders, market experts and real estate investors, and their predictions for 2021 have been all over the place. Some think that the housing market is going to crash next year, and some think that forbearance may become an issue, due to COVID-19. Regarding forbearance, it’s true, some homeowners did take advantage of government programs that allowed them to defer or forbear their mortgage payment to paying at a later date, and so because of this many people think that when those forbearances come due, people are not going to be able to afford to make their mortgage, or be able to afford to play catch up on their mortgage payments because of job layoffs or loss of income. However , here’s one thing that you’re not hearing out there, and it’s something that we talked about many times before that’s really important to look at. When we had the housing crash in 2008-9 you had people who had adjustable-rate mortgages or payments were doubling and tripling on them because they got into loans that weren’t good for them. For most of you reading this, you can probably attest to that. The other thing that’s really important to take note of, is most people that own homes right now, even if they just bought last year have a significant amount of equity. So worst case scenario if we do see this forbearance issue come up in 2021, we’re probably going to see a lot of inventory come to the market at once because there’s been such a lack of inventory. So personally, I don’t see how that’s going to be something that will crash the market. Best case scenario could be that we see appreciation slow down, because there has not been enough supply or inventory to meet the buyers demand. Most experts are predicting 2021 to be a very similar housing market is 2020, that we will continue to see a heated housing market, we will continue to see interest rates stay relatively low and that’s kind of what I’m guessing as we go forward. Now anything could change, and I could be totally wrong, I always reserve the right to be wrong.
📝 Refinances in 2020
Over half of the people that had mortgages in America applied for a refinance in 2020. Surprisingly, there’s still a lot of people that haven’t, even with interest rates being at all time lows. This year many homeowners refinanced and took advantage of the lowest interest rates even seen in history, lowering their mortgage payments, and put themselves in an even better position to weather any potential storm that could come with the uncertainty of 2021. Also, people have more equity in their homes than ever before, and they can certainly sell it and take that equity and do something different with it. Paying rent doesn’t look so great right now because rent is really high in most areas in the nation especially in California. If you haven’t looked into refinancing, contact our office to get prequalified and to see if we can help lower your monthly mortgage payment. Interest rates are still at an all time low and statistics show that half of Americans are eligible for a refinance.
🎄 Thank You For Your Business...
Thanks again for your continued support and referrals, if you have any questions, I encourage you to give me a call here at the office. I hope you and your family are doing well navigating these times, and I’ll be back next month for your January 2021 update. From my family and office to yours, Happy Holidays, Merry Christmas and Happy New Year. 🥂