Download: 2021 Housing Market Predictions
The experts break it down
Through the chaos of 2020 and all the droughts that it brought to the table, one pocket of relief in the midst of the chaos was the 2020 real estate market. Though it may seem like that should have been the last thing to see any forward movement, the lower mortgage rates and a severe lack in homes on the market made for the perfect mix for an increase in home values. Ultimately, creating increased wealth for homeowners.
But not so fast. As of January 2021, 5.2% of mortgages are in forbearance, or 2.7 million homes. According to Black Knight, a mortgage data and technology company, that 5.2% equates to $547 billion in unpaid principal.
Even still, experts are predicting another strong housing market for 2021 as the demands from the pandemic have changed home needs and supply. The predictions go on to say that the pandemic may have delayed buyers, and are expected to follow through sometime this year. While existing homeowners may have new demands as a result of the pandemic: increased space to accommodate the work-from-home lifestyle, virtual learning needs, whether it be one child or multiple in the space, or condo/townhome owners who reside in multi-family buildings may seek to relocate to single family homes to eliminate risk and exposure to the virus. With many, or most, proceedings being carried through virtually, i.e. tours and closings, the process of purchasing a home in 2021 may now be a much simpler procedure than previously performed.
A shock came when many young adults were making up 38% of the homebuyers in 2020, with millennials making up the largest share of buyers. And of course, higher earners with a decreased financial risk from the pandemic were accounted for in the home-buying market as well.
First time home buyers are likely to face challenges in 2021, as the monetary demand to buy a home is higher than ever. In 2020, the median household income for first time buyers in 2020 was $80,000, compared to $68,703 in 2019. And for repeat buyers, the median household income was $106,700 in 2020.
Unfortunately the affordability took a decline in the fourth quarter of 2020 in the majority of the United States. According to reports by Attom Data Solutions, the median home price had increased nearly 10% by the fourth quarter. The report also found that 55%, or 275 of 499, of the counties it analyzed had declined in affordability in the final quarter of 2020 when compared to past averages. The fourth quarter of 2019 sat at 217, while the fourth quarter in 2017 sat at just 164.