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In fact, home price growth hit a six-year high in September, with a whopping 6.7% jump in prices over the year. In some states, prices skyrocketed even more (12% in Idaho and 11% in Maine and Arizona).
For many investors, it’s made finding that next property difficult. Foreclosure moratoria have thinned out the distressed market, and rising prices elsewhere have made it hard to guarantee returns. It’s left many wondering: Will there ever be an end in sight?
While there’s no telling the future, there are some glimpses of what housing may look like in the new year. Want to make sure you’re primed and ready for what 2021 has in store? Here’s what we’re expecting.
Where will prices go in 2021?
If you look to industry experts, there’s solid agreement: Prices will keep rising. Fortunately, they’re unlikely to rise as much as they’re doing currently. Both Freddie Mac (OTCMKTS: FMCC) and the Mortgage Bankers Association (MBA) predict home price growth in the 2% range.
And experts over at CoreLogic (NYSE: CLGX) expect appreciation to slow even further. According to the company’s latest Home Price Index, prices are expected to rise a mere 0.2% by September 2021.
Another glimmer of hope lies in recent mortgage application data. Though homebuying demand has been strong for much of this year, MBA’s weekly survey data actually shows a slowdown in activity over the last month or so. Just last week, purchase loan applications were down 5% from the week prior. If this continues, it could tamp down home price growth even further.
Other housing market predictions for 2021
There’s also a likely wave of foreclosures coming at some point next year. Most foreclosure moratoria have already expired, and as mortgage relief options run out, lenders will start to foreclose on borrowers who’ve yet to settle up.
The exact timing for this wave will depend on each state’s unique foreclosure timelines. (It can take anywhere from a few months to a few years, depending on where a borrower lives.) When these waves do hit, investors will find themselves with plenty more options to choose from -- not to mention a major boost in affordability.
Construction is likely to pick up, too. Starts are already rising (up 14% over the year in October), but experts predict they’ll jump even more in the new year. Fannie Mae (OTCMKTS: FNMA) actually projects a 17.1% bump in single-family starts in 2021.
Keep in mind it takes a construction start about seven months until completion, according to Census Bureau data, so we won’t see that inventory right away. When it hits, though, it could offset some homebuyer demand and alleviate upward pressure on pricing.
Finally, let’s talk about mortgage rates. While they may not hit record lows again (like they did almost a dozen times this year), they should remain low in 2021. Again, all the major players agree on this one: MBA, Fannie, and Freddie. Each predicts 30-year fixed rates will remain in the high 2% or low 3% range across the year.
The Millionacres bottom line
There’s no crystal ball that can foretell the future, and with a wildcard like COVID in the mix, anything could still happen. But as of now, it’s looking like 2021 will bring more of the same -- with some added construction and a wave of foreclosures thrown in. For investors, it should mean a bit more inventory to choose from and, hopefully, a slowdown in those rising prices.
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