We’re already on the other side of Q1 2021, and both home price growth and low housing inventory combined with high buyer demand has created cutthroat competition in suburban areas and “second tier” metro areas across the country. As we look toward late spring and summer, the fast pace of COVID-19 vaccine distribution is hopefully signaling the beginning of the end of the pandemic. But some housing market trends caused by the pandemic are expected to continue. Here are a few trends that are on the horizon for the summer 2021 housing market:
- Buyers will remain focused on the suburbs, but city living will regain popularity.
- New construction homes will continue to come on the market, but housing supply will remain slim.
- Interest rates may increase some, but should remain relatively low.
- Home inventory will also increase, but it will remain a seller’s market.
Here’s what experts are predicting for in the summer 2021 housing market for buyers, sellers and new construction.
With interest rates to historic lows for most of 2020, the new year started off with a new record low for interest rates for 30-year, fixed-rate mortgages. Going into spring, mortgage interest rates have trended upward, but still remain low from a historical standpoint. Freddie Mac reported the average interest rate for a 30-year, fixed-rate mortgage was 3.13% as of April 8.
Low interest rates, a desire for more space among existing homeowners and an increasing number of new households nationwide have driven demand through the roof at the start of 2021. The number of homes on the market in March was 52% lower than in March 2020, according to an April report from realtor.com. Homebuyers can expect to compete in bidding wars, which can drive up prices and may mean the home search takes longer because buyers lose out to competing offers on a few homes before an offer is accepted.
The largest share of homebuyers across the U.S. are millennials, with the youngest in the generation closing in on 30 years old – a popular time to consider buying a home. Based on the number of searching buyers so far in 2021, experts say strong transaction numbers will continue, especially as vaccines continue to roll out and cases of the coronavirus continue to decline.
Many homeowners who might have sold chose not to put their homes on the market in the latter half of 2020, especially if those homeowners were already in a house with plenty of space for remote work and virtual schooling.
Some sellers appear to be more inclined to reenter the market. A realtor.com report notes that while the number of new listings in March was 20% lower than the number of new listings in March 2020, the decrease is not as steep as February’s new listings number, which was 24.5% lower than February 2020.
Growing consumer confidence, the rollout of vaccinations for adults and declining unemployment numbers all make selling a home feel less risky. The increase in inventory is expected to continue, but slowly, because most home sellers are also looking to buy another house to live in after selling their current one.
Sellers are predicted to continue to have the upper hand throughout summer 2021 housing market fluctuations, and home prices are expected to continue to climb as a result, which will be a boon for people who sell their houses. In February, the national median home price for existing homes was $313,000, a 15.8% increase from a year prior, according to the National Association of Realtors.
Reduced residential construction rates since the Great Recession have lent to a housing shortage over a period of multiple years. Builders are trying to increase housing stock: Building permits in February were authorized for 1.68 million privately owned new housing units in the country, according to the U.S. Census Bureau. That’s 17% more than February 2020, though it’s below the 1.88 million reported in 2021.
As the weather warms up for ideal construction conditions in many parts of the U.S., expect more newly permitted properties to come on the market or become occupied after completion. Experts say that even with consistent growth in builder activity, most summer 2021 housing markets can still expect the number of homebuyers to outpace the inventory of available homes.