Turbulence and uncertainty are two words that describe 2020 for many people. Given how impactful the pandemic was to everyday life, there was a worry that the real estate market would take a massive hit. However, it turned out that 2020 ended up being a surprisingly solid year for the housing market and projections forecast this positive trend to continue through 2021.
Why 2020 Was a Strong Year for the Housing Market
While the early part of the pandemic briefly stifled the market, the low mortgage rates and level of inventory had many buyers continuing their search for a home. This was also a year in which the first cohort of millennials were starting to buy their first homes. The advent of virtual showings and resources like Redfin and Realtor.com has made house hunting more accessible and efficient as ever. It has also proven that seasonality is less of a factor, now that people can house search from the comfort of their own homes. Another catalyst for 2020’s strength in the housing market was the mortgage rate hovering around 2.5-3% through the year. This will most likely persist for 2021 as well and will be an encouraging trend for many first time home buyers.
Millennials and Work-from-Home
According to a deputy chief economist from CoreLogic, “first-time home buyers will remain a strong force in the market as the largest cohorts of Millennials are turning 30”. This influx of prospective buyers are starting to hit life milestones, including getting married and having children. The demand for more home space will likely increase the activity in the market and may also cause upward pressure from trade-up buyers.
Many millennials have been working from home as a result of the pandemic lock downs. Companies have found that many of their operations are much more efficient when done remotely, especially in the tech industry. This method of work will most likely persist in the form of a hybrid work schedule that reduces the amount of days spent in the office overall. With less commute days, employees can now consider home options further away from the city center. These factors project a resurgence of the suburbs for 2021.
2021 Projections
According to realtor.com, December 2020 saw a record low level of inventory. The increase in buyer demand will render this a seller’s market. Given the lower level of development due to shortage in building materials, the low inventory will most likely continue in early 2021. However, there is hope that an economic rebound in the second half of the year will increase development of single-family homes. The higher number of competition amongst buyers may lead to an appreciation in prices by the end of 2021. The accessibility of online resources, the increase in inventory, and the increase in demand from millennials will lead to a strong year in the housing market overall. Realtor.com projects home sales to be 7.0% higher than 2020 and a 65.9% homeownership rate (highest since 2005).
East Bay Realty
We here at East Bay Realty understand the home buying/selling and construction management process down to a science, while also taking pride in our honesty and willingness to answer any of your questions. Our agents possess very thorough knowledge of the East Bay real estate market and use our 50 years of combined experience to get the most for our clients. We have found that today's house hunting process has made the agent-to-client relationship much more productive. Our clients have cited that our local knowledge, experience and communication / reliability are their top reasons for recommending us to their friends and family. Give us a call for a free consultation and we can show you how we can help!
510-344-6368