For as long as we can remember, real estate has made for a reasonably safe investment. In fact, statistics demonstrate that average home sale prices increased continuously from 1963 to 2007. However, is this still the case with the pandemic, recessions, financial crises like that of 2008, and other disasters?
In short, how is the market looking right now? Is it on an upward trend or going downhill from here? And if so, is there hope for a rebound? We’ll address all of these questions and more, covering the 2021 real estate trends that you can’t miss. So, tag along to find out!
1. Home Prices Are Increasing
A graph of the US price sales demonstrates that home prices flattened in 2018, decreased a bit in 2019, and fell significantly in 2020. Yet, despite all the odds, they’ve started increasing in late 2020. About 5.6 million single-family homes were sold last year, which hasn’t happened since the housing bubble (when high demand heightened home sale prices).
Of course, it’s worth noting that the increase or decrease of home prices in the property area is a significant factor that shouldn’t be overlooked. Nevertheless, there’s no denying the hiking home prices in 2021. They’ve shot up by approximately 20% from last year, making the national median $300,000 to $400,000.
This uptrend is partly due to the lack of houses for sale, low mortgage rates, and shortage in skilled construction workers. Also, the pandemic forcing people to work and learn from home made it that much more important to have a good and spacious place that could accommodate every family member’s needs.
To mirror this thought, Chris Glynn, Zillow Group principal economist, said that the pandemic “has reminded us all of the importance of home and how essential it is to have a safe space of shelter from the outside world”.
But let’s not get too carried away and focus on the real question: What does this increase in home prices mean for you as a seller or buyer? And should you wait it out?
Selling a Property
If you’re selling a property, you’re in luck! You can earn that profit to make your business thrive. And if you’re a homeowner, you’ll undoubtedly want the extra cash when selling your home so that you can afford a new place.
Also, if you’re selling your property and buying another, a key to earning profit is downsizing. After all, a house of the same size and in the same area as yours will be very costly. So, moving to a smaller home in your area can be the solution. But if that isn’t an option, consider moving to a house of the same size in a less expensive area.
Buying a Property
This period isn’t the best for buying, but we’ll help you navigate these rough waters. Here’s what you should know about mortgages and payments:
- 15-Year Fixed-Rate Mortgages: These conventional mortgages are arguably the cheapest home loans you can get your hands on. So, you won’t be paying much in fees and interest.
- Down Payments: If you save up at least 20% as a down payment, you can avoid PMI, the added fee to your mortgage that acts as security for your lender if you miss a payment. If your down payment is under 10%, that’ll probably translate into tons of fees and interest.
Renting a Property
With prices skyrocketing, this has created a supply-and-demand imbalance. So, if you’re looking to buy a property, you may end up resorting to rentals as a more affordable alternative. Harvard Joint Center for Housing Studies states that the monthly payments for renting a single-family house are much lower than those for purchasing one.
And rentals may be increasing in price, but that’s no match for the increase in house prices. If you compare ranges in February as opposed to a year before, you’ll find that home prices shot up by 17%. However, rents only went up by less than 4%.
Waiting It Out
Perhaps you want to postpone selling or buying a house, so is waiting it out a good idea? Well, the supply and demand imbalance would have to be settled for home prices to cease climbing.
However, the chief economist of the National Association of Realtors, Lawrence Yun, remarks that this isn’t likely to happen until next year. He projects that sellers won’t get multiple offers for a property by next year but that prices will continue to go upward.
After all, the general rule is that home price rates tend to increase. Still, as real estate prices become inaccessible to a bigger demographic, fewer potential buyers should get the price acceleration to slow down. But, these prices will already be out of reach for many by then.
So, if you’re considering buying, perhaps waiting around for an unlikely recession isn’t the best idea. Alternatively, this increase can be profitable for sellers, meaning that if you wait more, you’ll probably make a good profit. But keep up with the real estate market to ensure that your house’s value is going up.
2. Online Real Estate Services Are Thriving
Online real estate services have provided individuals with platforms to browse and even list their properties for sale. Take websites like Zillow, Redfin, and Trulia, for example. Such websites have revolutionized property management and real estate industries, and several factors have played into that:
Making Data Accessible
Online real estate companies collect and compile big data. We’re talking demographic information, selling and buying trends in particular locations, traffic, results of consumer surveys, and more. Then, they analyze these resources to come to conclusions about home value trends, potential home values in an area, and pricing ranges.
Needless to say, anyone in real estate can benefit from such big data. Homeowners and property managers can use it to make informed decisions. They can also benefit from historical and real-time information about buildings’ facilities and utilities regarding electricity, HVAC, fire safety, telecommunications, and more.
To elaborate, such data can help them decide on the proactive maintenance and replacement measures required. And with that, homeowners can keep their properties in good condition and their property managers and tenants satisfied.
Buying Houses
Yes, homeowners can sell their properties to online real estate companies. These businesses thrive by investing some cash into the properties, thus elevating their values. And they sell them at higher prices. Also, they take care of home inspections, showings, repairs, and all the hassle. Of course, that could inevitably mean less profit for sellers.
Hiring Virtual Agents
Some hybrid services aim to cut down on traditional agent commissions. So, they provide virtual agents. These agents offer customers a similar experience to what they would’ve gotten with most agents. Of course, having a virtual agent isn’t as effective as having a regular one. But it’s also better than selling yourself, and you’d be saving quite some money.
Conducting Virtual Reality Tours
The National Association of Realtors conducted a survey proving that about half the potential buyers take it to the internet first to research homes for sale.
So, it comes as no surprise that realtors are keeping up and creating virtual reality tours for their properties. These tours are much more convenient and accessible, as potential long-distance buyers can merely get their tour despite being miles away.
As for how this relates to online real estate companies, realtors can now virtually stage their properties and add accessories and furniture to their interior photos via some companies, such as roOmy.
Moreover, virtual reality tours take it to the next level when they’re for properties that are yet to be built. These tours allow potential buyers to visualize what the new house or apartment will look like once finished by providing realistic architectural walkthroughs.
Not to mention, property managers don’t have to go through never-ending instruction manuals to use the environmental controls because the virtual tour can demonstrate their usage.
3. Single-Family Rentals Are Flooding the Market
Although they’ve always been around, single-family rentals are now more likely to be controlled by real estate businesses than individuals. Up until 2018, real estate investments only held 2.3% of single-family rentals. As for now, investors own 20% of all home buying activity!
And that’s evident in the unprecedented hike in the stocks of single-family rental companies, including American Homes 4 and Invitation Homes.
Institutional Ownership
Since institutional ownership is becoming more prevalent in the single-family rental market, we should examine how this impacts renters.
On the one hand, renters are more likely to gain access to immediate maintenance. For example, if your shower is broken, the company will probably send someone to fix it fast. So, you won’t have to phone your landlord 10 times about it.
On the other hand, an institution-owned rental isn’t steady in terms of rents, meaning that they’ll probably increase with the market. Otherwise, an individual landlord might not accommodate market prices or increase your rent with them if you’re a good tenant.
Fewer Buyers, More Renters
With single-family rentals flooding the market, this shouldn’t be surprising. Since 2000, there have been 29% more renter-occupied households. To put this into perspective, owner-occupied ones only grew by 17%. Not to mention, over 95% of single-family rentals are occupied, which is a generational high.
4. Mortgage Rates Remain Low
Mortgage rates, the fees you pay to your lenders, are a percentage of your overall loan amount. Generally, they mirror the overall economy, rising and falling with it. So, in an economic crisis, the Federal Reserve decreases mortgage rates to facilitate spending and borrowing.
Since 2010, the average 30-year fixed-rate mortgage rate has remained under 5%. Moreover, it has retreated even more to 2.2% in January of 2021. Such low rates haven’t been seen for the 30 years that interest rates have been documented. Additionally, they’re expected to be around 3% for the rest of this year. So, let’s see how that impacts the market.
Selling a Property
If you’re selling a house while interest rates are low, this will further urge potential buyers to buy your place. However, you might want to keep your home on the market longer if interest rates go up this year.
Buying a Property
The fact that interest rates are low is excellent for a buyer. You can certainly save some money. But note that low interest rates may tempt you to snatch up a property that’s above your budget because it seems like a good deal. However, it’s only a good deal if you can afford it.
Tip: It’d be wise to buy a house whose payment is under 25% of your monthly take-home pay. And that includes principal, taxes, interest, and homeowner’s insurance.
5. Inventory Is Decreasing
Now, we’ve only mentioned this as a factor in house prices getting higher. But let’s unpack what else it entails. Inventory has decreased by around 30% in early 2021 in comparison with 2020, which is extremely low. In other words, there aren’t enough properties to accommodate the growing buyers’ demand.
Selling a Property
There’s less real estate for sale, meaning that there’s less competition between sellers. Therefore, you can expect many offer letters, which gives you the upper hand. So, you can choose between many options.
Buying a Property
This isn’t the best time to purchase a property because properties are sold unbelievably fast. In spring 2021, homes were sold 20 days faster than they were in previous springs.
So, here’s what you should do if you’re buying a house this season. For one, be sure to get preapproved for a mortgage. Since time is of the essence, you don’t want the legal work to bring your apartment hunting to a halt. After all, other preapproved buyers might snatch it up fast.
Furthermore, figure out your priorities in a house. And it would help if you were willing to sacrifice or overlook aspects that you want but don’t necessarily need.
Moreover, invest in a real estate agent. Despite house rates being high, the average rates in an area might be affordable. And a real estate agent can find you a home that’s within budget and still accommodates your lifestyle.
FAQs
Is It a Buyers or Sellers Market in 2021?
With the high competition over houses, accelerating home prices, and low inventory, the market is heavily favoring sellers. And that’ll probably persist for the remainder of 2021. Still, the fact that no crash is likely to happen makes us believe that there won’t be a buyers market any time soon.
Is Zillow Bad?
Zillow can provide potential buyers and property managers with the information they need. Nevertheless, it’s known for having inaccurate data and incorrect updates, mainly regarding changes in price and property status. So, it might show you that a property is for sale when it isn’t. So, take its information with a grain of salt.
Is 3% a Good Interest Rate for Mortgage?
3% or less makes for an excellent rate, which happens to be the 30-year fixed mortgage rate this year. So, it can enable you to save more money until the loan is paid.
What Are Today’s Mortgage Rates?
If you’re considering a 30-year fixed rate, the interest rate is 2.848%, and the Annual Percentage Rate (APR) is 2.908%. And 20-year fixed-rate mortgages have an interest rate of 2.588% and an APR of 2.670%.
As for 15-year fixed rates, they come with 2.087% interest rates and 2.191% APR. Finally, 10-year fixed rates interest rates amount to 1.970%, and their APR is 2.059%.
Is Renting a Single-Family Home Worth It?
Whether a property is a single-family rental or a multi-family rental, it can make for a good investment. Of course, single-family rentals are more affordable and entail higher appreciation. However, both types can provide you with positive cash flow.
Final Thoughts
All in all, there have been numerous changes in the real estate market, and they’re all somehow interconnected. For example, low inventory means there isn’t enough supply to cover the demand, which drives up home sale prices.
In turn, as prices get increasingly high, more people become unable to purchase properties and turn to rentals. And that takes us to how single-family rentals are flooding the market, more likely to be owned by real estate investments rather than individuals.
Moreover, online real estate businesses have taken the market by storm. Among other things, they provide home buyers and property managers with big data, buy properties from users, invest in them to increase their values, and sell them for higher prices.
Perhaps the silver lining for buyers is the low mortgage rate. These rates went down and aren’t likely to get much higher anytime soon, so this should facilitate borrowing. Still, there’s no denying that the market is benefiting sellers in almost every aspect and will probably continue to do so for some time.