According to the latest CoreLogic Home Price Insights
Report, nationwide home values increased by 8.2% over the last twelve
months. The dramatic rise was brought about as the inventory of homes for sale
reached historic lows at the same time buyer demand was buoyed by record-low
mortgage rates. As CoreLogic explained:
“Home price growth remained consistently elevated
throughout 2020. Home sales for the year are expected to register above 2019
levels. Meanwhile, the availability of for-sale homes has dwindled as demand
increased and coronavirus (COVID-19) outbreaks continued across the country,
which delayed some sellers from putting their homes on the market.
While the pandemic left many in positions of financial
insecurity, those who maintained employment and income stability are also
incentivized to buy given the record-low mortgage rates available; this is
increasing buyer demand while for-sale inventory is in short supply.”
Where will home values go in 2021?
Home price appreciation in 2021 will continue to be
determined by this imbalance of supply and demand. If supply remains low and
demand is high, prices will continue to increase.
Housing Supply
According to the National Association of Realtors (NAR), the
current number of single-family homes for sale is 1,080,000. At the same time
last year, that number stood at 1,450,000. We are entering 2021 with approximately
370,000 fewer homes for sale than there were one year ago.
However, there is some speculation that the inventory crush
will ease somewhat as we move through the new year for two reasons:
1. As the health crisis eases, more homeowners will
be comfortable putting their houses on the market.
2. Some households impacted financially by the
pandemic will be forced to sell.
Housing Demand
Low mortgage rates have driven buyer demand over the last
twelve months. According to Freddie Mac, rates stood at 3.72% at the beginning
of 2020. Today, we’re starting 2021 with rates one full percentage point lower
than that. Low rates create a great opportunity for homebuyers, which is one
reason why demand is expected to remain high throughout the new year.
Taking into consideration these projections on housing
supply and demand, real estate analysts forecast homes will continue to
appreciate in 2021, but that appreciation may be at a steadier pace than last
year. Here are their forecasts:
Bottom Line
There’s still a very limited number of homes for sale for
the great number of purchasers looking to buy them. As a result, the concept of
“supply and demand” mandates that home values in the country will continue to
appreciate.
Source: Real Estate with Keeping Current Matters