he 2020 housing market was plagued by low inventory, rising home prices, and endless bidding wars, making it hard for some would-be homeowners to get their foot in the door. Will 2021 be any different? Or, will it be a good time to buy a house?
If you’ve been eyeing a home purchase but have sat out due to 2020’s competitive market (not to mention the other challenges last year came with), you might be wondering just that.
Though there’s no crystal ball, a clearer picture is starting to emerge of what this year’s housing market may look like. Here’s what you need to know:
Interest rates should remain low.
The industry’s major players all expect mortgage rates to stay in the low 3% range come 2021. The Mortgage Bankers Association predicts the year will start off at a 3.1% average rate for 30-year loans, while Fannie Mae expects an even lower 2.8%. Freddie Mac projects a 3% average across the entire year.
Low rates like these can reduce the monthly payment that comes with buying a house, and they can also expand your budget, making it more affordable to buy a higher-priced home.
Home prices will probably keep rising.
It’s likely that home prices will continue their upward climb in 2021, though it looks like it may be at a slower pace than in previous years. MBA projects a 2.4% jump in prices (much better 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.
You may have more homes to choose from.
Prices might rise, but the upside is that you may have more homes to choose from. Housing starts are expected to increase steadily in 2021, meaning more new construction properties should hit the market as we head into the year. Both Fannie Mae and MBA predict the stronger single-family construction than we’ve seen in at least two years.