In these ever-changing economic times, it can be hard to predict how the housing market will respond. 2020 saw low mortgage rates, and many people chose to purchase a new home or refinance their current one to take advantage of them. Home prices rose as sales continued to climb, with the prediction that buying a home will only get more expensive.
How does that impact homebuyers in 2021?
The Office of Policy Development and Research (PD&R) puts out a report each month regarding the status of the country’s housing market. The United States Housing Market Conditions (USHMC) gives insights on various housing market indicators, such as trends and key statistics in the current housing market.
By reviewing the data and insights, we can get a bird’s-eye view of how the housing market is starting to trend in the beginning of 2021 and what it means for the rest of the year.
Whether you’re a first-time buyer looking to purchase a home or a homeowner wanting to upgrade, monitoring the housing market will help inform your buying decisions.
The February 2021 housing market indicators show that the housing market is improving. Buyers are still taking advantage of the record-low interest rates.
1. Sales of Existing and New-Build Homes Continue to Rise
In January, the sales of previously owned homes continued to increase, going up by 0.6%. This includes sales of townhouses, single-family homes, and condos. These numbers reflect contracts signed in November and December, due to the time it takes to close on a house.
While interest rates continue to stay low, there aren’t a lot of houses available on the market. House prices are also high currently. These factors can limit the number of home sales happening as well.
Purchases of new homes increased, but that number is based on the signing of a purchase contract, not actually closing on it. The demand for newly built homes is high as there are limited choices of existing homes on the market and the prices for them are high.
However, the COVID-19 pandemic is still disrupting the making and distribution of home building materials, causing a delay in construction. As the pandemic levels out, homebuyers who opt to purchase a newly built home may experience minimal delays as restrictions begin to lift and manufacturing companies resume operations.
2. Inventory of Previously Owned Homes Hit a Record Low
There were 1.04 million existing homes for sale in January 2021, a record low. That number is down 1.9% from December 2020 and 25.7% lower than January 2020. With not a lot of existing homes to choose from on the real estate market and the ones available being priced high, many homebuyers will be looking to have new homes built in 2021.
When there is a limited number of homes available on the market, home prices will go up. In such climates, home sellers have no competition for offering the best deals. If the supply of existing homes goes up, then the prices will start to drop because there will be more competition. When there aren’t a lot of houses on the market in a certain area, sellers don’t need to compete for having the best deal in the neighborhood. They can price their homes higher since buyers don’t have a lot of choices. And if the sales numbers are any indication, buyers are still buying homes despite the higher prices.
3. Mortgage Rates Are Still Low but Moving Up
In January 2021, mortgage rates were at a record low of 2.65%. The housing market did so well during the COVID-19 pandemic primarily because of the low-interest rates. Plus, the Federal Reserve recently voted to keep interest rates low until the economy recovers, but they are expected to slowly inch up.
Different factors affect refinance and mortgage rates. These include inflation and unemployment numbers. Interest rates offered to each home loan applicant also vary based on their credit score and financial history.
That said, mortgage rates are expected to rise at the start of the year as people return to work. They, however, could stay low if something else arises around the COVID-19 vaccine distribution or the pandemic in general. The impact of the pandemic on the economy is the main thing to pay attention to when looking at interest rates and how they will potentially rise or lower. Since we’re still in the pandemic, experts believe rates won’t go above 4%.
Buying an existing or newly built home is a huge commitment and not something that should be taken lightly. The housing market is dependent upon so many factors, but if you’re looking to buy a home in 2021, it is a good idea to start monitoring these reports.
USHMC provides housing market indicators based on each region in the country. Depending upon where you live and where you’re looking to buy, evaluate each month’s housing indicators. If you’re buying your first home, you may want to look at an area with affordable properties. This may help you qualify for a loan easily. If you want to invest in a property, look at areas that have increasing home values.
If the area you’re looking at shows an increase in home sales, that means there’s a lot of competition for home buying. Houses are getting snatched up, and it may be difficult for you to have an offer accepted on a home. Monitor the number of home sales and when they start to decline, that means it’s a buyer’s market. You’ll have less competition when buying a home.
Wading through all the USHMC housing market indicators can be overwhelming, but you need to know how all those details can affect you. Monitoring the price of homes in the area you’re looking at will help you not overpay for a home and know the right time to start looking.
Newly built homes will rise in 2021 as building supplies are easier to access. Instead of waiting for an existing home to hit the market, have one built for you.
Contact us today to discuss building your dream home.
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