Forecasting the 2021 Market

Here are the top five trends to expect in the 2021 real estate market.

To help you better understand what you should anticipate in the real estate market this year, today I’ll introduce you to the Swanepoel Trends Report, which comes from a company called T360. They invest over 10,000 hours to craft this report each year, which is a kind of forecast for the year. We put a good deal of time and effort into understanding the report, and, we pulled out the top five trends that you should pay attention to:

1. Home affordability. While the average income is on the rise, there is a disproportionate rise in the average home prices. This puts a real strain on affordability. Contributing factors include labor shortages, the cost of building materials, the cost of land acquisition for new construction, as well as a shortage of inventory.

2. Inventory. Inventory remains low, and it’s becoming difficult to meet the number of buyers in the market who are looking for homes. Part of the reason behind this is that many homeowners are deciding to stay put instead of buying houses due to the pandemic. Instead, many are choosing to renovate homes instead of listing them. In fact, inventory is down 50% year over year.

3. Mortgage rates. Rates are still at an all-time low, and we anticipate that they will stay low throughout the year. Looking at 30-year fixed-rate mortgages over the last 12 years, we can see that they’re the lowest they’ve ever been —around 2.5%!

4. Home pricing. With the factors that we’ve already covered and the fact that we experienced a 7.9% appreciation rate at the national level in 2020, experts are projecting more of the same in 2021. Here in Chester County, we appreciated by around 13%.

5. New construction. Since the crash in 2008, we’ve been in dire need of recovery in terms of new housing starts. For us to maintain our equilibrium of 1.5 million new starts this year, several things need to fall into place. COVID has had a big impact on that, as well as labor shortages and the increasing prices for all the raw materials—the cost of lumber has doubled in the last 12 months. New construction is the only true outlet for the demand because as homeowners sell their homes, they become buyers, so there’s not really an offset.