What trends will shape the real estate industry in 2021?
Every year seems to offer new challenges for the real estate industry, and 2020 isn't an exception. Therefore, it's important to know what trends will influence the real estate industry in the upcoming year.
The pandemic has disrupted home sales in spring 2020, but the pause has led to significant growth at the end of the year that has almost made up for the scarcity.
Will this situation repeat in 2021? The answer to this question can be perceived from the real estate trends foreseen by experts, so check them now.
Smaller choice of homes for sale
Buyers can expect to have fewer homes to choose from. The inventory was 30% lower at the beginning of the year, and the offer was so small that it could hardly meet the buyers' demand.
What does it mean for buyers? It's important to be on the alert all the time or you may lose the best home due to an active hunt for them. Experts say that this year homes have been sold 20 days quicker than a year ago. Another thing to remember is that buyers don't have much time to think over the deal. They should make decisions fast and admit the following pieces of advice:
- Sacrifice some home features that were important for a buyer;
- Buy cheaper homes to upgrade them over some time;
- Expand the search by adding other neighborhoods, sizes, room number, etc.;
- Getting ASAP preapproval before going home hunting.
What should sellers prepare for when the inventory is low? They can get a much bigger number of offers and pick that one which will allow moving at your most suitable pace. However, if a seller wants to buy the next home instead, it's important to find a substitute prior to signing the deal.
The consistent rise of home prices
The first quarter of the year faced a price growth of 20% and this is good news for sellers, who can earn more!
But what can buyers experience due to that? The advice from experts says that buyers should find out how much house they can afford for the money they possess. It's important to stick to the budget and resist the temptation to take debt. But there are several more tips to consider too.
If you have to pay for a house, remember the amount shouldn’t be higher than 25% of the take-home fee. This amount includes all the points and fees. Furthermore, it’s vital to save some money for a down payment (20% or more) to avoid Private Mortgage Insurance fees.
Pay your attention to a 15-year fixed-rate conventional mortgage since it is the most affordable one without extra interest and fees.
How this rise can influence sellers? They can get better profit, of course. It is important to find a good real estate agent and set a price that may be a little higher to earn more on this deal. Naturally, it’s important not to hurry and wait for a good offer. The lack of inventory will make buyers pay more, and sellers will win in this situation!
Rather low mortgage interest rates
Fortunately for people who plan to take a mortgage, the interest rate has dropped to 2.2% at the beginning of the year. This percentage is one of the lowest for over 30 years, and financial experts predict that this rate will go up and down around 3% in 2021. It’s a great time to refinance and get mortgages as you see.
How will this tendency impact buyers? Clearly, buyers can save on home purchases. However, it is important to understand that buying a home is a good idea only if you can afford it, and low interest rates shouldn’t be misleading.
On the other hand, sellers can also benefit from this fact since buyers are more motivated to buy a home at lower rates. However, if the percentage goes up, the house may spend more time in the market.
The number is online real estate services is growing
Nowadays, you can use online solutions for a variety of things, not only to browse the market. Modern apps and startups allow even buying and selling homes in this way.
Some companies offering services online see a listing from the owner and suggest buying a home immediately and avoid waiting for a good offer. Naturally, buyers will get less profit since the company’s goal is to sell it at a higher price then, especially if it invests extra money in such a home. But sellers can forget about the hassle connected with the home sale and get money faster.
Another direction gaining popularity nowadays is the services of a virtual agent. Some services suggest saving of agent’s commissions by ordering similar help online. This is a cheaper alternative than cooperating with an agent but still, it’s more expensive than selling the property yourself.
Lots of document-based tasks can be now handled online too. The support for e-signatures and remote notarization held online has contributed to the speed of real estate deals greatly. It means both buyers and sellers can close deals without leaving the comfort of their homes, which is a real breakthrough.
Accessibility of risky purchase options
In addition to traditional ways of getting property, people can face more unusual ways of buying homes too. The most popular of them is rent-to-own, for example. You can sign an agreement with a home seller to pay him a specific amount for a certain period of time and when this time passes, you’ll become the owner of the property. It’s a great way to avoid mortgages, but the monthly rent will increase significantly for a tenant and he’ll lose money if he once decided to break the deal too. Probably, both repairs and maintenance costs will be his responsibility too!
Some people also make a huge mistake by taking loans for down payments. When you run out of money, it’s better to postpone the home purchase for better times. Only think, you’ll have to pay not only the interest rate of your mortgage but also the loan fee.
Things to consider if you don’t plan to buy or sell a home in 2021
- The price will continue growing in 2021 and later and the average pace of this increase will be around 3%
- There is little chance for a real estate market crash. Buyers are motivated to enter the real estate market by quite low mortgage interest rates and the process of home buying remains competitive stimulating the home price to grow.
- Buyers’ interest will remain high. They become less choosy and expand the area of search easily.
