Where Is the Housing Market Headed in 2021
When the economy first shut down, many people hoped for a V-shaped recovery, but it’s become clear that’s not happening across the board. While the overall economy is still struggling, the housing market has seen a V-shaped rally as strong demand has driven up foothills home prices by over 7%.
Clients have asked if we’re experiencing a bubble that will burst like happened in 2008. We think the answer is no. The cause of the housing crisis over a decade ago was irresponsible lending practices that saddled people who couldn’t qualify for loans with ultra-low down payments. When they found they couldn’t make their monthly payments, they didn’t have enough equity to sell & recoup their down payments, so they walked away & let their loans be foreclosed. With the run-up in home values over the last decade, today’s sellers have ample equity to sell & make a profit, even if forced to do so. So, no repeat of 2008.
On the other hand, even with the recent stimulus package that congress passed, if government forbearance programs stop, continued stimulus bills are not passed, and unemployment benefits run out, homeowners who live paycheck-to-paycheck may be forced to walk away from their obligations, creating the possibility of a real estate bust as supply rises while the pool of buyers falls. While the possibility of widespread unemployment can’t be discounted, we seem to have avoided 1930’s-style layoffs so far in this pandemic. So we see this as only a possible, not probable, scenario.
Two phenomena that will positively affect the foothills housing market are that buyers are moving away from cities to nearby suburban & rural areas and the upper limit on conforming loans has been increased to $596,850 as rates remain well under 3%, boosting affordability.
Our specific predictions?
-The shortage of homes to buy will continue
-Mortgage rates will rise from their record lows, but remain around 3%
-Prices will rise, but more modestly than in 2020, by around 4%
Stay tuned as we watch how housing in the foothills might be affected by the winds of national & regional economics. If you have questions about your home’s value in today’s market, contact us at [email protected] or 720-248-8757.