How Secure are the Projections for the Housing Market in 2021?

IS 2021 a good time to move to a new house? What is happening in the property market?

Excellent questions but hard to find solid answers in this unusual time with the pandemic still showing no signs of abating.

What is true is the US housing market has had a strong couple of years with sustained increases in property values across the country generally, and prices do not appear to have particularly fallen back during 2020 even if they have not risen substantially.

So – good news for sellers not so good for buyers, as both groups cannot be pleased at the same time.

Predictions for 2021 are difficult to make as we do not know the path the pandemic will take, but it does appear it will be with us strongly for the first few months of the year at least.

And there is the first unpredictable element – the spring. Spring is traditionally the hottest time of the year to sell a property as people look to come out of their winter hibernations, take stock of the year ahead and start acting on plans they put into place over the winter months.

That cycle is likely to maintain even if at a reduced level, so there should be a boost to property sales in the spring, even if suppressed in comparison to previous years as people are more cautious about visiting homes.

The market has seen fewer homes for sale in 2020 as people have decided to put off selling and hunkered down to wait the pandemic through. But ironically that means there has been great interest from buyers in the properties that have been listed – and with reduced supply can come higher prices. This may well continue in 2021.

Unemployment is also a key factor – with millions of Americans currently out of work, at the highest level in over a decade, prospective buyers have been reduced in number as it has become more important to conserve income, and much more difficult to get a mortgage if household income has dropped. Even for those families who have been less affected work wise during the pandemic, there is a greater risk of losing a job right now, so people are being cautious at undertaki8ng such a large life change with potentially large financial repercussions.

Yet economically the situation is not as gloomy as just the unemployment figures may suggest – the cost of borrowing is at record lows and the Federal Reserve is showing few signs of changing that anytime soon. Some countries are even experimenting with negative interest rates – so if you are able to move now is as good as you are ever likely to get to lock in a cheap mortgage rate as money is close to being free. The stock market has also rebounded from its early wobbles at the start of the pandemic, and with the general election over has priced in the change of administration. Markets dislike uncertainty and have the clarity they were seeking politically for 2021.

The conclusion? Expect uncertainty as we head into 2021. The virus will continue to suppress sellers and buyers will find it harder to get mortgages – but those that do will find cheap money available. And given some people will always face having to move, be it for work or family reasons, there is likely to be competition for the houses that are listed.