In this article
2020 was a very strange year on all levels. The mortgage and real estate industries were dramatically impacted by the pandemic. Everything was more or less shut down from mid-March and into early June. After that, we saw a flurry of activity to make up for the lost spring market. Conditions were prime for sellers with low inventory, high buyer demand and rising home prices. Home buyers also experienced increased buying power thanks to record-low mortgage rates.
Things leveled out quickly in late 2020 and have stayed similar so far in 2021, which means home buyers should have certain expectations if planning to buy this year.
Timing is very important when buying a home. You want to lock in a good interest rate. You want to find the perfect home at an affordable price. To achieve this, it takes careful planning and preparation. Be sure and check out our 7-part home buying guide series to understand all the key steps involved in buying a house, including getting your finances in order and being pre-approved for a mortgage loan before you start your home search.
Here are some of the home buying trends we are seeing in 2021:
Demand Higher than Supply
As has been the case for several years now, the buyer demand far outweighs the supply. In other words, there are more home buyers looking than homes available for sale. This is what has made it such a strong seller’s market. This isn’t expected to change as 2021 progresses. Buyers should expect to pay a little more and possibly make some concessions when making offers. You want to be careful not to give up too much. You just have to be willing to compromise some of your expectations. You probably aren’t going to find the best house on the market and buy it below asking price without giving up something else in return.
Increasing Home Prices for Home Buyers
Home prices are expected to keep going up as our economy recovers and home sellers remain in a position of power because of low inventory. However, most real estate experts believe that the rate of price increase will not be as high as it was last year. Prices will go up, but not quite as dramatically as they did in 2020.
Another factor to consider is seasonality. Home prices and the number of sales can ebb and flow depending on the seasons. Home prices will generally be more during the spring and summer months compared to the fall and winter. That’s because inventory is usually lower during these seasons. Houses typically sell faster in the warmer months, as well.
Low Mortgage Rates
Though mortgage rates have been steadily rising in 2021, they are and will remain relatively low. Interest rates were at record lows last year and the market cannot sustain those levels. As the economy recovers, rates will keep going up. However, by historic standards the current rates are still very favorable for home buyers. Experts suggest average rates of 3.15% across 2021, which is actually only up slightly from 3.025% in 2020 and well below past rates that were well over 4% just a couple years ago.
Home Buying Technology
Real estate technology was already evolving rapidly before 2020, but the pandemic increased the need for advancements like virtual home tours, e-closings, fewer open houses and Zoom consultations. Many of these technological resources are here to stay and can help home buyers streamline their home search and closing processes.
Pre-Approval is Critical
Too many home buyers make the mistake of shopping for a home before they shop for a lender. You want to find a reputable lender first and make sure you get pre-approved for your mortgage. This will enable you to know exactly how much home you can afford, and it will give you better standing when making purchase offers. Most sellers will look right past any offer that does not include a mortgage pre-approval letter from a reputable lender. Buyers who aren’t pre-approved will present too much risk, especially when there are so many buyers out there and most listings will get multiple offers. Sellers want the transaction to go as smoothly as possible, which means the buyer’s funding can’t fall through.
Credit Scores and Down Payments
Finally, 2021 home buyers will have to make sure their finances are in good shape before starting the home buying process. There are many buyers competing for loans, so lenders and banks can afford to be picky about who they approve. You want to have a good credit score, low debt-to-income (DTI) ratio and be able to put down a decent amount toward your home purchase. Down payment, credit score and DTI requirements may vary depending on the type of mortgage loan for which you are applying. However, the stronger your financial standing is, the better off you will be when trying to qualify for any mortgage loan.
If you are planning to buy a home in 2021, you want to start preparing as soon as possible. The first step will be to talk with a lending expert at Moreira Team. We will help review your finances, explore all your mortgage options and get pre-approved for your loan. Contact us today!