The U.S. entered 2021 with pandemic fatigue, though it hadn't – and still hasn't – slowed down homebuyer activity. The first months of the year have seen rapid growth in home prices as low inventory of houses on the market combined with high buyer demand creates fierce competition in suburban areas and medium-to-small metro areas across the country.
Looking forward to late spring and summer, the fast rollout of COVID-19 vaccines is making many hopeful that an end to the pandemic is in sight. But some housing market trends caused by the pandemic are expected to continue.
In summer 2021, here are a few trends shaping up for the housing market:
- Interest rates may rise slightly, but are expected to remain relatively low.
- Home inventory will increase, but it will stay a seller's market.
- Homebuyers will still be focused in the suburbs, but interest in city living will see some revival.
- Rental assistance will ease some eviction worries for renters, but the financial impact of the pandemic will be long-lasting.
Here's what experts are predicting for buyers, sellers, renters and new construction in summer 2021.
The coronavirus pandemic drove mortgage interest rates to historic lows for most of 2020, and the new year started off with a new record low for interest rates for 30-year, fixed-rate mortgages when Freddie Mac reported the average interest rate was 2.65% in early January.
Going into spring, mortgage interest rates have trended upward, but still remain low from a historical standpoint. On April 8, Freddie Mac reported the average interest rate for a 30-year, fixed-rate mortgage was 3.13%.
Low interest rates, the continued creation of new households across the U.S. and a desire for more space among existing homeowners have driven demand through the roof in 2020 and the start of 2021. Many areas are seller's markets, meaning there aren't enough homes available to match the number of active buyers.
The number of homes on the market in March was 52% lower than in March 2020, according to a from realtor.com published on April 1. Homebuyers can expect to compete with others in home offers, which can drive up prices and may mean your home search takes longer because you lose out to competing offers on a couple of homes before your offer is accepted.
George Ratiu, senior economist for realtor.com, says the competition won't deter many buyers from the market. The largest share of homebuyers across the U.S. are millennials, with the youngest in the generation closing in on 30 years old – a popular time to consider buying a home.
"For many millennials the last year provided an opportunity to save. … Yes, the market is difficult, but a lot of young people out there remain committed to buying a home," Ratiu says.
Todd Szwajkowski, a real estate broker and president of SwakeGroup at Dream Town Realty in Chicago, as well as president of the firm's LGBT client services division, says that he was surprised when 2020 turned out to be his team's best year for home sales, despite the pandemic.
Based on the number of interested buyers so far this year, Szwajkowski says he expects strong transaction numbers to continue, especially as vaccines continue to roll out and cases of the coronavirus continue to decline. "I don't think it's going to negatively affect the market. If anything, I think it's going to be good for the market," he says.
A major contributor to the low supply of homes on the market in the latter half of 2020 was the fact that many homeowners chose not to relocate – especially if they were already in a house with plenty of space for remote work and virtual schooling.
As many grow hopeful for an end to the pandemic, some sellers appear to be more inclined to reenter the market. The realtor.com report notes that while the number of new listings in March was 20% lower than the number of new listings in March 2020, the decrease is not as steep as February's new listings number, which was 24.5% lower than February 2020.
Ratiu notes that growing consumer confidence, the rollout of vaccinations for adults and declining unemployment numbers all make selling a home feel less risky. "A lot of sellers have been looking at these as a green signal," he says. Expect inventory to pick up in April, May and as we head into summer, June and July."
Though, this increase in inventory will be at a "measured pace," Ratiu says, because most home sellers don't effectively increase housing inventory without also contributing to rising demand. Most sellers will buy another house to live in after selling their current one.
Sellers will continue to have the upper hand throughout the summer of 2021, and it's reasonable to expect home prices to climb as a result – a positive for those who do choose to sell their houses. In February, the national median home price for existing homes was $313,000, a 15.8% increase from a year prior, according to the National Association of Realtors.
Keep in mind that these numbers represent the expectation for housing on a national scale. The effects on individual housing markets will vary widely.Renting