Although there were huge challenges and economic hardships for many people and businesses in 2020, it was not all doom and gloom. In fact, there were also some bright spots to be found, which by all indications, seem to be carrying forward into 2021.
The real estate market is a perfect case in point.
In spite of being in the midst of a global pandemic, the real estate market showed a lot of momentum, and has remained surprisingly resilient. This has been buoyed in part by the historically low interest rates, which kept many people transacting in the housing markets throughout the U.S.
Real Estate Market Predictions for 2021
As we turn our sights to 2021, economic experts predict a continued strengthening of the real estate market.
During the National Association of REALTORS (NAR) second annual Real Estate Forecast Summit in December, Lawrence Yun, NAR’s chief economist and senior vice president of research, presented the forecast, which calls for a post-pandemic rebound with continued job growth, and stable interest rates in 2021. This was the consensus according to a survey of more than 20 top U.S. economic and housing experts.
Their predictions included:
- Gross Domestic Product (GDP) growth of 3.5% in 2021, and 3.0% in 2022
- An annual unemployment rate of 6.2% in 2021, with a decline to 5.0% in 2022
- Average annual 30-year fixed mortgage rates of 3.0% for 2021, and 3.25 % for 2022
- Annual median home prices to increase by 8% in 2021, and by 5.5% in 2022
- Housing starts of 1.50 million in 2021, and 1.59 million in 2022
- The share of the U.S. workforce working from home to be 18% in 2021 (down from 21% in 2020), and 12% in 2022
Top 10 Real Estate Markets in 2021
NAR also named the top 10 real estate markets during COVID-19 and in a post-COVID-19 environment in the next 2 years.
Those markets are:
- Atlanta-Sandy Springs-Alpharetta, Georgia
- Boise City, Idaho
- Charleston-North Charleston, South Carolina
- Dallas-Fort Worth-Arlington, Texas
- Des Moines-West Des Moines, Iowa
- Indianapolis-Carmel-Anderson, Indiana
- Madison, Wisconsin
- Phoenix-Mesa-Chandler, Arizona
- Provo-Orem, Utah
- Spokane-Spokane Valley, Washington
In determining these top real estate markets, NAR looked at a variety of indicators to project a metro area’s recovery and growth potential. Included among those indicators were: unemployment rate; net domestic migration, including movers from expensive West Coast area; shares of workers in retail trade, leisure and hospitality industries; mobility to retail and leisure places; and the fraction of the workforce working from home.
One of the most important questions that anyone buying or selling a home in 2021 will ask is whether 2021 will be a buyers’ market or a sellers’ market.
Buyers’ Market or Sellers’ Market in 2021?
Let’s first look at what determines whether a real estate market is considered a buyers’, sellers’, or balanced market. It is based on the number of months of listing inventory in any specific market. Generally speaking, a real estate market is said to be in balance when it has a 6-month supply of inventory. As it goes above that mark, it is considered a buyers’ market, and as it dips below that mark, it is considered a sellers’ market. For example, a 3-month supply of inventory would be sellers’ market, while a 7-month supply would be a buyers’ market.
According to Realtor.com, the real estate listing website, 2021 is likely to be a robust sellers’ market, as home prices have hit new highs, and inventory levels are likely to remain relatively low. A low listing inventory means that more buyers will be competing for properties in the marketplace. This in turn often increases the sales price of a home, since competing buyers may offer to pay above listing price in order to secure the purchase of the property.
Mortgage Interest Rates in 2021
The lure of historically low mortgage interest rates was a big factor in the strength of the 2020 real estate market. So, will they remain low enough to continue to attract home buyers in 2021?
The short answer is yes!
We have already seen mortgage rates hit an all-time low of just below 3 percent in December. And even with mortgage rates expected to increase modestly in 2021, they will still remain low enough to continue to attract homebuyers to the market.
Additionally, low interest rates will continue to encourage homeowners to refinance their mortgages in order to take advantage of lower rates and save money.
Low interest rates also continue to incentivize would-be renters into becoming homeowners. Oftentimes, leasing a property or even renting an apartment can mean a much higher monthly payment when compared to a monthly mortgage payment.
Real Estate is a Local Market
It is important to note that real estate is a local market. So, although we often speak of real estate in broad-sweeping terms and report the trends that impact markets across the country, there is no such thing as a national real estate market.
In large cities across the country, the real estate market can be further segmented into areas or neighborhoods. As such, it is critical for people who are relocating to a new city to work with a real estate agent who is a local market expert, and who can drill down to the specific area and neighborhoods within the various communities. That agent needs to be able to provide historical data and insight about the specific area, neighborhood, and community that a home buyer is interested in living.
For example, in a large metropolitan area, such as the Dallas Metroplex, there are so many different areas and neighborhoods, and each community is really a real estate market unto itself. Thus, a local Realtor needs to be able to provide details about both the macro and micro markets that encompass a city, and have the analytical skills to compare and contrast different areas and neighborhoods.
Understanding Market Trends
When relocating to a new city, an individual has to be able to rely on the knowledge, experience, and expertise of a local real estate professional. This is especially important when it comes to evaluating the investment opportunity that buying a home represents. Along with market knowledge, the agent has to be able to clearly explain current market trends and provide valuable insight that will assist in the overall homebuying decision.
Fortunately, this year is already off to a great start, and we anticipate continued positivity in the real estate market throughout 2021.
Benefits of Working with a Relocation Management Company
There are significant benefits of working with a Relocation Management Company (RMC) like VERSA when it comes to the real estate process as it relates to relocation. These benefits ring true for both the employer and the employee alike. Having an established process and trusted partners to assist a relocating employee is critical to the overall success of the relocation.
For starters, we have a very stringent vetting process when it comes to selecting real estate firms and Realtors to partner with us and be of service to our clients’ employees in cities across the country. Those Realtors must have exceptional knowledge and experience in the local markets they represent, and more importantly, must receive specific training in relocation. This gives our clients added confidence in the Realtors’ understanding of the relocation process.
Furthermore, the Realtors we work with have to demonstrate their consistency in delivering the highest level of performance standards, which includes providing the white glove experience that we require and promise to all of our clients.
Lastly, VERSA operates in an open network. Therefore, we have the luxury of choosing our real estate partners completely independent of any ownership, network, or organizational membership. This gives us the discretionary freedom to select our partners without limitation and bias. VERSA only partners with the premiere real estate firms and Realtors that specialize and understand the nuances of corporate relocation.
As an innovative leader in relocation management services, VERSA is strategically focused on providing a personalized relocation experience to our valued clients and their relocating employees, that others in the industry are challenged to deliver. We produce relocation results in a unique culture with global resources emphasizing transparency, versatility and customizable relocation solutions.
Let’s work together to build a unique, customized relocation solution that is the right fit your organization.
Please contact us anytime!