Do you want to know what home buyers can expect this year? Despite COVID-19 and the widespread economic upheaval in 2020, the real estate market has still been chugging along.
The housing market this year has pretty much been a seller’s market owing to rising prices, low inventory, record-low mortgage rates, and the consequent bidding wars. If you’ve held off on buying a home because of these market conditions, you probably want to know what the 2021 market is going to look like.
To help you plan accordingly, here’s what Boston home buyers can expect in 2021.
Continuing Housing Trends Boston Home Buyers Can Expect in 2021
First, you should be aware that the major market conditions of 2020 are expected to continue throughout 2021. These continuing conditions that Boston home buyers can expect include:
CONTINUING LOW MORTGAGE INTEREST RATES
Mortgage rates have fallen to new record lows, which means that now is the best time in 30 years to buy a home. However, some people are still concerned about limited inventory and rising prices.
The industry’s major players all expect mortgage rates to stay below 3.5%, with many loan products available in the 2.5-2.875% range depending upon the term, loan type, and property type. The Mortgage Bankers Association correctly predicted the 3.1% average rate for 30-year loans that started out the year, while Fannie Mae expects an even lower 2.8%. Freddie Mac projects a 3% average across the entire year.
Such low-interest rates will make buying a home much more affordable for many buyers, but especially first-time buyers. Lower rates and lower monthly mortgage payments will allow them to buy more home.
PRICES STILL RISING, ESPECIALLY IN THE SUBURBS
Although the rate of increase slowed a bit in 2020, home prices continued to rise. And that trend is expected to continue throughout 2021. It’s likely that home prices will continue their upward climb in 2021, especially in the suburbs of Boston, though it looks like it may be at a slower pace than in previous years.
MBA projects a 2.4% jump in prices (much lower than last year’s 5.1%), while Freddie Mac expects an increase of 2.6%. Fortunately, if prices do rise, low-interest rates will help blunt the impact slightly, though it may mean buying a smaller home or dealing with a slightly higher monthly payment.
Many experts have also predicted that a decline in mortgage rates will continue for the next one or two years. This is mainly due to the low interest rate environment that has been put in place by the Fed and Fannie Mae.
INVENTORY REMAINING EXTREMELY LOW
Some industry watchers believe inventory may begin to increase, especially if foreclosures begin taking hold this year, providing buyers more homes to choose from. This change is expected to be the result of more new construction and more housing starts.
But others disagree.
Many more experts say that Boston home buyers can expect that there is no clear evidence to date that the housing inventory shortage will be remedied to match or outpace the demand. Housing development continues to lag across the nation. Although the US housing market did see a rise in home building during May through July, data for August 2020 reveals a drop.
The supply of existing and new homes remains low, and it’s apparent that this trend will change appreciably throughout 2021. Experts suggest that new development will yield a construction market boom over the next several years. It’s anticipated that developers will spend $1.9 trillion to build homes which are needed to fill growing demand, but it may take until 2023 before it reaches adequate levels to meet demand.
2020 – A Definite Seller’s Market
To further examine what Boston home buyers can expect in 2021, let’s take a closer look at the 2020 market:
Many experts thought that the advent of the coronavirus and COVID-19 would bring about a buyer’s market because home sales dropped dramatically and many sellers pulled listings. But this expectation just didn’t pan out (not for very long anyway).
By September of 2020, median home prices had risen 11% year over year, and active listings were down 39% year over year. This means that 2020 was a strong seller’s market in most areas across the country, and especially here throughout the Greater Boston area. While city neighborhoods saw less dramatic price increases or (in some situations) decreases, neighborhoods allowing buyers more space and private yards outside the city have exploded, with Open Houses causing traffic jams on quiet streets and properties receiving multiple over-asking offers.
Will 2021 Be a Buyer’s or Seller’s Market?
The consensus of industry experts is that, yes, Boston home buyers can expect 2021 to be a seller’s market as well – and for basically the same reasons 2020 was:
- Mortgage rates are likely to remain low
- Housing inventory will remain low
- Demand for real estate will rise due to a combination of factors
- Home prices will continue to see strong gains
So far, 2021 is off to a blockbuster start for sellers – extremely tight inventory and tons of buyers waving around their pre-approval letters looking to buy. Sellers absolutely are in the driver’s seat with respect to negotiating prices.
Local Markets and Local Agents
This may all sound like a dire situation for buyers, but it really isn’t as bad as it sounds. For one thing, remember, mortgage interest rates will still be near record lows, which is always great news for home buyers. And it may turn out that inventory increases after all, which moves things more toward a buyer’s market. In addition, housing conditions vary (often widely) from local market to local market, making some areas and neighborhoods better for buyers.
So 2021 can still be a good year for buyers, but it’s going to be a FANTASTIC year for sellers.
To get the lowdown, then, on what Boston homebuyers can expect in 2021, contact us today at (617) 657-9811.
Boston and Beyond – Just Hit the Market!
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