If you are interested in buying or investing in a home in 2021, it is important to first understand what happened to the housing market in 2020. Doing so will give you a better understanding of how to proceed in your homebuying ventures in the new year. Let’s break down the 2020 housing market trends, including what to expect in 2021.
What Happened to the Housing Market in 2020?
It is no secret that the COVID-19 pandemic drastically impacted the real estate market in 2020. However, it is not all bad. In fact, some changes may benefit you depending on your home purchasing goals.
The housing market in 2020 can be broken down into three major trends: high home prices, low interest rates and low home inventory. Let’s talk about what these three things mean for you.
House Prices Increased in 2020
With the COVID-19 pandemic came the loss of millions of jobs and unbelievably high unemployment rates. Both of these factors have naturally created a weaker economy and impacted the housing market in 2020.
Nevertheless, despite all that has happened, it has not stopped millions of potential homeowners from hopping online to find the home of their dreams. Online mortgage providers have seen increased activity this year.
2020 seems to have been a seller’s market rather than a buyer’s market. Sellers can list their homes well over market-price and still make a sale. The National Association of Realtors (NAR) released a report in late September that showed existing home sales had hit a 14 year high in August of 2020.
This trend does not only impact those looking to sell or purchase a home. It can also benefit current homeowners. When a house gets sold it has to be appraised. Due to the increase in home prices, houses are appraising higher because they have to justify the sale prices. This means that people who have existing home loans have more equity--or worth--in their home, making it a vital time to consider a cash out refinance.
While the high prices are not necessarily beneficial for those looking to buy a home, low interest rates have kept buyers enticed in 2020.
Interest Rates Decreased in 2020
Every home mortgage has an interest rate. The housing market in 2020 has seen a drastic decrease in interest rates. Low home interest rates generally make it more affordable to purchase a house, especially for first time homebuyers.
The interest rates for conventional home loans have seen a significant decrease in 2020. For example, in November of 2020, a 30 year fixed-rate mortgage interest rate was 3.12 percent. This is impressively low compared to a rate of 3.7 percent in November of 2019 and a rate of 4.87 percent in November of 2018. This decrease in interest rates naturally makes buyers more motivated to purchase a home.
The trend is also beneficial for those who purchased their home in, say, 2018 when the 30 year fixed-rate mortgage was 4.87 percent. Because of the low interest rates in 2020, now may be the right time to refinance your home and take advantage of low refinance mortgage rates.
Nevertheless, trending low interest rates can quickly change. So, for first-time homebuyers, an adjustable-rate mortgage (ARM) is also a valid option moving into 2021. ARM loans start with a low introductory rate and adjust over time, making buying a home affordable for people with smaller budgets.
For all of your mortgage questions, you can reach out to Wyndham Capital Mortgage directly.
Home Inventory Decreased in 2020
The housing market in 2020 has seen homes sell at exceptionally high price points, interest rates drop to exceptionally low percentages and available home inventory take a dive. Nationally, in January 2020 home inventory decreased by 13.6 percent compared to the previous 4.5 years, with larger markets seeing an even higher percentage decrease.
The need and demand for housing is plenty but the supply is few. While this is good news for sellers, the imbalance may harm the chances of affordable homeownership opportunities moving into 2021. However, this housing shortage will ensure that home buying remains competitive and will allow for steady price growth.
What the Housing Market in 2020 Means for Buyers
Some of these 2020 housing market trends make now a good time to purchase or invest in a home. With little indication of these three major trends drastically changing in 2021, homes will continue to move off the market quickly due to low inventory and interest rates.
If you are looking for an easy mortgage company to help you make the right purchasing decision, consider Wyndham Capital Mortgage. As trusted online mortgage lenders we understand the housing market in 2020 and know how to set you up for success in 2021. Contact us today to take advantage of the way the 2020 housing market will impact buying a home in 2021.