The strength of the real estate market in 2020 came as a surprise.
Demand unexpectedly jumped:
- More time at home revealed changing needs in the size and functionality of the living environment.
- The flexibility to work from home opened the door to more appealing and lower-cost locations.
- Interest rates remained at record lows, motivating action.
Supply rapidly declined:
- The pandemic limited the willingness of many homeowners to enter the market.
- New construction starts haven’t kept pace with population growth since the Great Recession of 2009.
- Employment uncertainty or other financial strains disrupted the ability of owners to consider a move-up purchase and for renters to become buyers.
The imbalanced supply and demand pushed home price appreciation to around 8%.
Looking forward through 2021, the real estate market could continue this trend; though it means overcoming some anticipated obstacles:
1. Will demand remain strong?
- Buyers who postponed their moves due to COVID-19 will likely enter the market in the early spring.
- As pandemic restrictions fade, increased employment and wages create more qualified buyers, especially if mortgage interest rates can remain low through the summer.
2. Can supply rise to meet demand?
- As vaccinations and treatments reduce the risk and slow the spread of the pandemic virus, sellers previously fearful of contact are ready to move.
- With millions of mortgages in forbearance, many borrowers will be forced to sell unless the foreclosure and eviction ban is extended past June.