The housing market in 2021 is a perfect storm of the good (very low mortgage rates), the bad (great demand for the property), and the ugly (bidding wars and rapidly rising home prices).
If you ask, “Should I purchase a property in 2021?” The answer is difficult to predict. Purchasing a home in 2021 might be a fantastic idea or a financial nightmare.
It is essential to grasp the state of the housing market, the likely future path of interest rates, and all the advantages and disadvantages of purchasing in 2021 before taking action.
The Current State of the Housing Market
In 2021, the property market will be far from average. According to Realtor.com, the number of homes being offered for sale was down 31 percent from the same time in 2020.
Simultaneously, a reviving economy, historically low mortgage interest rates, and a considerable proportion of Millennials in their prime homebuying years all contribute to the real estate market’s demand. The combination of low inventory and great demand results in a highly competitive seller’s market, with asking prices increasing by double digits.
Home prices jumped 15.4 percent from May 2020 to May 2021 and are predicted to grow another 3.4 percent in the following year. Additionally, a Federal Reserve Bank of St. Louis estimate forecasts that the national average home sales price will be $434,200 in the second quarter of 2021.
The Myrtle Beach real estate market has maintained record-breaking levels of growth. According to the Coastal Carolina Association of Realtors’ May 2021 real estate market report, closed sales of single-family homes surged by 52.3 percent in May of last year. The good thing is that new homes in Myrtle Beach are ready for sale even with this high demand. Additionally, Showcase IDX voted top home search in Georgia in 2022. So it is safe to say that South Carolina is on the rise.
That being said, a knowledgeable real estate agent can assist you in determining the market value of homes in your region.
Factors That May Have an Impact on Your Investment
It’s better to be aware of the following factors before you invest in your dream home.
The FMHPI (Freddie Mac House Price Index) is a measure of average US home price inflation. It shows that home prices in the United States climbed by 11.3 percent in 2020, owing to strong housing demand and record-low borrowing rates. However, according to the prediction, growth will decelerate to 4.4 percent in 2022. Freddie Mac’s current home price index for the United States is 248.1 in July 2021.
The market is shifting in favor of buyers, according to Realtor.com’s September 2021 national housing report. Homes continue to sell swiftly, and listing prices have progressively increased year over year. While the inventory of current listings is historically low, the gap between this year and last year continues to narrow. In September, weather-related interruptions in various places resulted in a decline in newly listed homes year over year. The decline in newly listed residences this year is the first in five months.
After exceeding their peak growth rates, home prices are currently climbing in the single digits. These market indicators suggest that purchasers will benefit as we reach the second half of this year. However, median list prices continue to decline in various metro regions due to a rise in lower-priced homes. Thus, while new sellers are entering the market at near-normal levels, they may need to consider pricing more competitively in future, even if property values remain high.
In September 2021, the national median listing price for active listings was $380,000, an increase of 8.6 percent over the previous year and 20.6 percent over 2019. From August to September, the median national home price for active listings remained unchanged. Compared to last year, metro areas had an average price rise of 4.1 percent, which is somewhat higher than the 3.5 percent rate last month. The largest metro areas in the country have witnessed a slower rate of price growth than the rest of the country.
Median Listing Prices
While the increase in median listing prices has slowed, this does not indicate a property market meltdown. However, the proportion of residences with price decreases increased in September, surpassing the previous year’s level. The proportion of residences with price decreases grew by 1.5 percentage points to 17.9 percent, only slightly higher than the 17.3 percent recorded in August. However, the proportion of price decreases remains about 5 percent lower than in 2019. While this remains within typical levels, it may imply that some sellers are pricing more aggressively than in the previous year and a half.
Decline is Stopping
While the drop-in time on the market has slowed, properties are still being snapped up quickly due to continued strong demand. The length of time that a typical listing is on the market is starting to follow seasonal trends.
The average property was on the market for 43 days, down seven days from the previous year in September. As the number of newly listed properties increases, the previous months’ dramatic inventory declines have slowed. As a consequence, the increase in listing prices has slowed.
By late 2021, real estate will continue to increase faster than average due to lack and demand. Home prices, including distressed sales, climbed 18.1 percent year over year in August 2021, surpassing the 45-year history of the CoreLogic Home Price Index. In addition, home prices grew by 1.3 percent month over month in August 2021, compared to July 2021.
Idaho (32.2 percent) and Arizona had the most year-over-year growth (29.5 percent). Prices in major cities/metros such as Las Vegas, Los Angeles, San Diego, Denver, Houston, and Chicago continued to rise in August, with Phoenix leading the way at 30.9 percent year over year. According to the experts, home prices will climb by 0.3 percent month over month from August to September 2021 and by 2.2 percent year over year from August 2021 to August 2022.
While the housing market continues to grow and support the post-pandemic economy, these market pressures have an unbalanced effect on access for certain buyers. For example, 59 percent of customers interested in purchasing a home reported total home incomes of at least six figures, compared to 10 percent of consumers interested in purchasing earning less than $50,000.
Reasons to Buy a House in 2021
Although 2021 will be a challenging year for potential homeowners, there are several compelling reasons to purchase a home this year.
According to Freddie Mac, the average interest rate on a 30-year fixed-rate mortgage is only 2.8 percent as of July 29, 2021. As a result, homebuyers this year may take advantage of some of the lowest mortgage interest rates in history, which can help make homeownership more reasonable.
Rates Are Increasing
All good things must eventually come to an end, even historically low-interest rates. Unfortunately, numerous mortgage experts forecast that interest rates will increase next year. And although it is hard to forecast how fast or how high-interest rates will climb, it is not unrealistic to believe they will top 4 percent by the end of 2022.
House Prices Are Growing
With prices projected to continue growing in the following year, purchasers in 2021 will have an opportunity to accelerate their equity accumulation.
Apart from financial factors, there are several reasons to purchase a property. For example, perhaps your family is expanding, and you want more room. Perhaps a job relocation necessitates relocation, or you choose to reside in a certain school district. Any of these things might make 2021 an ideal time to purchase.
Reasons Not to Buy a House in 2021
Suppose you do not need a house immediately, or you want to choose the house in the right way, taking more time. In that case, there are several compelling justifications for waiting until 2022 (or even later) to purchase one.
Imagine falling in love with a property and making an offer, only to discover that several other buyers outbid you. Regrettably, this is a predicament that many customers nowadays find themselves in.
Sixty-five percent of homebuyers faced at least one rival offer in June 2021, down from 74.1 percent in April. Waiting until demand stabilizes before making a purchase may help you escape a bidding war and get a better price on the home you desire.
Harder to Qualify
Numerous mortgage lenders increased their qualifying standards in the aftermath of the epidemic. With so many individuals out of work, lenders required better credit scores, greater cash reserves, and more income and employment verifications before obtaining a mortgage.
If mortgage demand declines, lenders may relax their lending rules, making it simpler to qualify. Thus, if you are concerned about your prospects of getting accepted for a loan, delaying may be a prudent decision.
When is the most excellent time to purchase a home? When you have a strong credit score, a stable salary, little debt, and enough funds to meet the down payment and closing fees.
If you are not quite there yet, delaying the purchase of a property will allow you more time to improve your financial situation. This will strengthen your borrowing position and enable you to qualify for a lower interest rate, which may help offset the increased purchase price.
The real estate market has been moving at an unusually fast pace. The housing market is reviving, with purchasers anxious to acquire houses and properties they have been admiring throughout the closure. Interest rates are likely to stay low in 2021 but gradually climb. Cheaper mortgage rates attract those considering acquiring a house.