Amid the COVID 19 pandemic, the US housing market grew by a jaw-dropping $2.5 trillion in 2020. It was the biggest growth in a single year since 2005. Houses flew off the market as demand grew and competition intensified.
But if 2020 was remarkable, 2021 seems set to be even stronger for the housing market. In today’s post, we outline some of the hottest housing market trends you can expect before the year is out.
Read on to learn more.
1. House Inventory Continues to Be Low
In 2020, the US housing inventory declined by a record 39.6 percent. In 2021, we are seeing the same trend. There just are not enough homes on the market to meet growing demand.
What Low Housing Stock Means for Buyers
If you are planning to purchase a home this year, you will need to stay on your toes. The fact is, good houses hardly stay more than a few days on the market. So what can you do to land a decent house in this competitive market?
Get Preapproved Early Enough
One of the essential home buying tips is to get preapproved well before you start hunting for a home. This move is especially crucial in the current market where houses are in such short supply. Without a preapproval, do not be surprised when other buyers who have already done this legwork will snag up homes you are interested in right before your eyes.
Let Go of Some Wants
It might prove extremely difficult to find a house with all the features you want. Be realistic and do not hesitate to sacrifice some of the things on your wish list. If a home has your must-haves and is in a good neighborhood, consider purchasing it and upgrading with time.
Widen your Search
No doubt you have a clear idea of where you want your home to be located. But if that location proves too competitive, consider a less popular neighborhood. You may be pleasantly surprised by the gems you may discover.
What Does Low Housing Inventory Mean for Sellers?
The current housing market shortage is great news if you are thinking of selling a house. With selling competition so low, you can expect to receive numerous offers. Once you list your home, you can sit back and enjoy picking the best offers.
2. Home Prices Continue to Rise
2020 was characterized by high home prices, and that trend seems set to continue this year. Experts predict that home prices could climb by as much as 5.7 percent in 2021.
What Rising Home Prices Mean for Buyers?
For those planning to purchase a house in the current expensive market, it is essential to cultivate a plan. Determine what you can really afford and do your best to stay within your budget.
Here are a few other tips for homebuyers:
Commit to Affordable Monthly Payments
Make sure that your house payment does not exceed 25 percent of your take-home pay per month. This sum includes your mortgage payments, homeowner’s insurance, HOA fees, and so on.
Make a Sizeable Downpayment
The goal is to avoid paying private mortgage interest (PMI), which is charged when your downpayment does not meet the minimum required amount by your mortgage provider. If your down payment is still too little, consider saving up more and putting off your home purchase till next year.
Once you have crunched the numbers and determined what monthly payment you can comfortably afford, work with a reputable real estate agent to search for homes within your budget.
What Do Higher House Prices Mean for Sellers?
If you are putting your home on the market this year, you can look forward to a sizable profit. Work with a real estate agent who knows the area to help you price your home accordingly, so you know your homes worth in the current market. This helps to simplify your decision process when offers start coming in and you will be empowered by knowing the difference between a decent offer versus a great offer.
Do not be in a rush to accept the first offer that you get. Wait until you get an offer that makes you the highest profit. You will need that money for your next house.
3. Mortgage Interest Rates to Remain Low
Mortgage interest rates have been low in recent years, and that is set to continue this year. Expect these rates to remain around 3 percent throughout the year.
What Low Rates Mean for Home Buyers
The current low mortgage rates are good news for buyers as it means you should be able to afford a bigger mortgage; however, do not fall into the trap of buying a home before you are ready to take advantage of low rates. It is still important to crunch the numbers and go for a mortgage whose payments you can make without a struggle.
How Will Low Mortgage Interest Rates Affect Home Sellers?
Given that buyers will have greater motivation to buy homes before rates start to climb, you can expect many offers for your home. If you still plan to hold on to your home for much longer, it is a great time to refinance your mortgage and take advantage of the low-interest rates.
4. Home Buying Options Continue to Increase
The housing market has seen the emergence of creative home buying options that you may want to use to your advantage. Some of these trends include:
Down Payment Loans
Homeowners who do not have money saved up for a down payment are increasingly opting to apply for loans to fund the down payment. Before you make this move, find out whether your potential lender allows it. Most lenders will not.
But even if you do find a lender who allows you to make this move, keep in mind that taking out a loan in addition to your mortgage will only mean more fees and interest. It may be better to put off the home purchase until you can pay for the down payment from your own savings.
Rent-to-Own Option
Some sellers can allow you to rent a house for a given period of time before you become the owner. It is an attractive deal for aspiring homeowners who cannot afford a home just yet.
One of the benefits of the rent-to-own arrangement is that you do not need to qualify for a mortgage right away to get into the home you would like to own. You also get to bypass the amount of time you would need to raise a downpayment.
Of course, you will have to pay more every month as a portion of your rent goes toward future ownership of the home. The challenge here is that if you decide at some point that you no longer want to purchase the home and break your contract, all that extra money goes to waste. Besides, repairs and maintenance of the home become your responsibility, even when the house is not fully yours yet.
Take Advantage of Today’s Housing Market Trends
The housing market trends of last year seem set to continue this year. Competition for houses will only get stiffer, with home prices rising to a new level. Whether you are planning to purchase a home or listing yours this year, being aware of these trends will help you make informed decisions.
Are you interested in finding a reliable real estate agent in your area? Visit our website today and learn how we can help.