If the past year has taught us anything about real estate, it’s that our collective need and desire to move is greater than anything the natural world might offer up to stop us.
After a brief pause in which we cocooned indoors, adjusted to new work and school routines and weighed moving during a pandemic, home sales in 2020 reached a pace and volume not seen in four decades.
The dynamics, however, were skewed: Buyers — many newly free to work remotely and eyeing historically low interest rates — turned out in droves. Meanwhile, homeowners mostly took a wait-and-see approach to selling that drove up prices as buyers competed for the limited number of homes for sale.
Now, with more than half of American adults fully vaccinated and millions more scheduled for vaccinations by summer, buyers and sellers are expected to show up in ways that could make 2021 another one for the record books.
If you’re thinking of selling or buying this year, you’re probably interested in what experts have to say about what the market might look like as more people get vaccinated and the economy continues to recover just as we enter what has traditionally been the peak season for buying and selling homes.
Here’s how things are shaping up:
Potential sellers are growing more confident about listing their homes
Buyers will be happy to know that widespread distribution of COVID-19 vaccines is expected to bring more homes to the market.
“We expect that the vaccine rollout will likely boost inventory, as sellers become increasingly willing to move if/when they feel safer doing so — resulting in greater numbers of new listings beginning this spring,” says Chris Glynn, Zillow’s principal economist.
A recent Zillow survey of homeowners found that 70% say they would be mostly or completely comfortable moving to a new home when COVID-19 vaccine distribution is widespread, compared to barely half (52%) who say they currently feel comfortable. The difference represents more than 13 million additional households who say they expect to feel newly comfortable moving once the vaccine is widely available that don’t necessarily feel that way now.
Their increased confidence — and a desire among some for new digs better suited for remote work and schooling — could give buyers more choice of homes and some breathing room in what has been a frenzied few months.
Experts predict increasing home values
The overwhelming consensus among economists is that home values will continue to increase in 2021.
The typical U.S. home was valued at $272,446 in February, up 9.9% from a year ago — the fastest appreciation in almost 15 years. In dollar terms, it means the typical U.S. home was worth $24,473 more in February than it was 12 months earlier.
Zillow economists expect home values to grow by 10.4% through March 2021. A panel of more than 100 leading economists, real estate experts and investment and market strategists also predicted gains in home values, but at a smaller rate. Collectively, these experts in the Zillow Home Price Expectations Survey projected home values will grow by 6.2% in 2021.
In addition to vaccine distribution, buyer demand and high prices factor into selling decisions
More than half of the expert panel (53%) predict a rise in the number of for-sale homes, likely in the second half of the year. The top reasons they cited for the expected boost in listings: More sellers expecting to cash in on high home prices, and more newly built homes coming up for sale.
In fact, about 14% of homeowners in a recent Zillow survey say they are considering selling their home within the next three years. Of these, 10% currently have their home listed for sale, 41% say they are considering selling in the next year, and 48% say they’re considering selling within the next two to three years.
Homeowners with plans to move and sell in the next three years say they’re confident they can sell on their timeline and for a profit: 93% say they are somewhat, quite, very or almost completely confident they could sell their home within their preferred time frame if they listed it for sale, and 92% express the same degrees of confidence that they can sell for a profit.
A significant share (39%) of homeowners selling in the next three years say they see the current market as their best opportunity to get top dollar for their home.
The pool of buyers is likely to grow
So where does that leave buyers?
It’s important to remember that 63% of sellers also buy another home, so the for-sale inventory won’t expand as much as the numbers suggest even if people who say they’re thinking of selling actually do. And with interest rates still at historic lows, the pool of buyers is likely to remain large.
So although it appears there will be more homes to choose from, the growing strength of the economy and current trends in home prices and inventory indicate the market will continue to be a strong one for sellers as more buyers enter the market to take advantage of low interest rates.
For buyers shopping for the most affordable homes in the nation’s largest metros, competition is likely to be especially tough.
There are still opportunities for buyers
There’s little doubt that these are tough conditions for buyers. But there also are opportunities, given the low interest rates and the potential to avoid appreciating home prices by buying sooner rather than waiting. First-time buyers who are able to work remotely also may find opportunities for affordable homes in smaller markets around the country.
Buyers who have their financing lined up — and who can act quickly on a home that works for them — could save hundreds on their monthly payments by taking advantage of the low interest rates and buying before homes appreciate further.
As always, it’s important to remember that the best time to buy is when it’s best for you and your family.
Published by Zillow