Even though the coronavirus pandemic badly impacted the economy as a whole, one sector that’s managed to thrive despite the odds is the housing market. After facing some setbacks in the first few months of 2020, the real estate market has recovered and has gone from strength to strength. Here are some predictions on how things will go from here:
Affordability Will Be an Issue
Throughout 2020, more and more people worked toward moving out of multi-family buildings and into single-family homes, valuing space that was made even more important by the pandemic. There was a very high demand for houses, but low availability. That, combined with the record low mortgage rates, has drastically increased property prices.
The 30-year fixed mortgage rate is currently at 2.73%, meaning a borrower will pay $386 for every $100,000 they borrow. For comparison, this time last year the rate was 3.70%, so borrowers would have paid $460 every month.
Home prices are showing no signs of going down, and mortgage rates don’t seem to be increasing until well into 2021. Now is the right time for people to either refinance their homes and get better mortgage terms or buy the properties they’ve been wanting to before they’re priced out of the market entirely.
Increasing Home Values
According to Zillow Economic Research, the annual home value growth will increase to around 13.5% by the middle of 2021. Sales volume is also expected to remain high, nearing 6.9 million units by the end of 2021—a 16-year record.
Many industries have had to adapt quickly to the changes brought about by the COVID-19 pandemic, and the housing sector is no different. Under conditions of lockdown and social distancing, virtual house tours and e-signings have taken over. Now more than ever, both sellers and buyers are relying heavily on technology.
Where the demand for new houses is high, supply has been relatively restricted. House prices are expected to rise or hold steady around halfway through 2021, but not decrease.
Sales of Newly Constructed Homes
While the sales figures for existing homes have been impressive, new home sales have also witnessed a steady growth, which is enabling builders to increase their prices.
According to research conducted by Urban Land Institute, a nonprofit in Washington D.C., single-family homes are on track to beat sectors such as retail, hotel, commercial and rental. New single-family construction is expected to rise to about 940,000 in 2021 before reaching 975,000 in 2022.
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