If you’re looking to buy a home, you’ll stand the best chance in a buyer’s housing market, where listings are flush, demand is low and buyers have the upper hand — not to mention most of the negotiating power.
Seller’s markets, on the other hand, are on the opposite side of the spectrum. They’re marked by high levels of competition and rising home prices, and in most cases, you’ll have a harder (and more expensive) time finding a home.
For most of America, we saw the latter conditions in 2020, with buyers facing unprecedented competition and increasingly out-of-reach home prices for much of the year.
Will 2021 be more of the same? Let’s take a look.
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A buyer’s housing market in 2021?
It’s not likely we’ll see a buyer’s housing market in 2021, at least according to experts. Most major players are projecting home prices to rise, and while strong construction could put more inventory on the market, it likely won’t be enough to tip the scales in buyers’ favors.
With that said, it does seem like buyers will see some relief at some point. For example, home prices are still expected to rise in 2021, but at a smaller pace than we saw in 2020. Freddie Mac projects prices to rise only 2.6% — much better than 2020’s 5.5% clip.
Low mortgage rates will also help offset those rising prices. Though rates probably won’t hit the bargain-basement numbers seen this year, most economists project they’ll stay in the high-2% to low-3% range. Fannie Mae actually predicts a 2.8% rate across the entire year.
The biggest problem will be the low levels of inventory met by ever-increasing demand. Though work-from-home opportunities have certainly contributed to this (and will continue to do so), there’s also rising demand from younger buyers to consider.
“The oldest millennials will turn 40 in 2021 while the younger end of the generation will turn 25,” said Danielle Hale, chief economist at Realtor.com, in her recent 2021 forecast. “Older millennials will be trade-up buyers with many having owned their first homes long enough to see substantial equity gains, while the larger, younger segment of the generation age into key years for first-time homebuying. At the same time, Gen Z buyers — who are 24 and younger in 2021 — will continue their early foray into the housing market.”
The bottom line
Conditions should ease at least slightly as we get into the new year. To give yourself a leg up, get preapproved for your mortgage, partner up with an experienced real estate agent, and be willing to get creative in your offers. If you can stand out from the competition, that dream home could be yours.