After a lull during the first quarter of 2020, the housing market set record-breaking growth as home buyers continued to vie for the relatively few homes on the market. Overall inventory in December was down 7% from November, the largest monthly drop since January, and 33.8% from the same time in 2019, according to Zillow.
If you’re on the fence of deciding to rent or buy (or refinance) right now, you may have many questions. Will the market change in 2021? Will home prices drop or increase? Will interest rates rise, decline, or stay the same?
Pro Tip: View our refinancing webinar
Those aren’t easy questions to answer. For some guidance, we gathered what industry leaders are saying. We hope these thoughts will be helpful as you think about buying or refinancing in the coming year.
Will 2021 be a “seller’s market?”
Answer from Glenn Kelman, CEO of Redfin: Most likely. Many sellers are holding off on listing their homes due to the current unstable economic climate. Others aren't listing their properties because they don't want to deal with the health concerns that come with having potential buyers view their homes in person. Once things start to improve on the pandemic front, we could see an influx of homes for sale, which will help drive down demand and make home prices more affordable. But unfortunately, that may not happen for quite some time.
Will mortgage interest rates go higher or lower?
Answer from Mike Fratantoni, Chief Economist, Mortgage Bankers Association: Our forecast has rates rising from 3% for the current quarter [Q4 2020] to 3.3% by the fourth quarter of [2021]. The forecast could change depending on whether there is another substantial wave of new COVID-19 cases or a delay in a vaccine coming to the market. A sharp downturn in the economy could mean rates stay at current ranges, although we see that scenario as less likely.
Why are some people leaving larger cities, as reported by several media outlets?
Answer from NAHB Chairman Chuck Fowke and NAHB Chief Economist Robert Dietz: Demand in lower density markets stems from the fact that housing is less expensive compared to urban areas and buyers can afford larger homes to accommodate home offices, exercise rooms and other specialty rooms which are in higher demand since the pandemic. The ability of individuals and families to live further from urban cores is empowering consumers to acquire housing with more space at a lower cost. A key question is how long this effect will last. Our forecast assumes at least a persistent, partial effect beyond the deployment of a vaccine.
What wildcards could shake things up?
Answer from Danielle Hale, Chief Economist, realtor.com: The most impactful will be the U.S.’s ability to control and contain the spread of COVID-19 as well as distribute a vaccine. Additional lockdowns and quarantines could put a dent in housing inventory and sales, slowing the market and putting increased pressure on buyers. Conversely, if a vaccine is rolled out quickly, it could lead to better than expected sales and a strong increase for home prices and inventory. Also, the possibility of a double dip recession is still in play as the U.S. continues in a K-shape recovery. In the short term, this could lead to less consumer spending. In the long term, this could impact the U.S. housing market as “would-be” buyers disappear from the market, cooling demand and driving down home prices.
Will 2021 be a good time for our Members to buy/refinance?
Answer from Anthony “TJ” Powell, Executive Vice President for AAFMAA Mortgage Services LLC: There is no right or wrong time when it comes to military moves. As we all know, a PCS can happen quickly, and to an unexpected location. If you’re in a position to buy, 2021 would be a great time for you: Interest rates will most likely remain near historic lows. At the same time, you won’t want to wait too long – housing prices are expected to continue to rise. So keep those parameters in mind in making your decision.
We’re Here to Help
If you’re not certain about whether or not it’s the right time for you to purchase a home or refinace your existing mortgage, please contact us online today or give us a call at 844-218-6926. One of our Military Mortgage Advisors will be happy to provide you with an honest and fair comparison of your mortgage options, including a wide range of low-rate and low-cost mortgages designed to meet your needs.
Ensuring our Members obtain the best mortgage possible is our mission. Get your free mortgage assessment today!
For more information about how AAFMAA continues supporting the military community during the COVID-19 crisis visit www.aafmaa.com/COVID19.