Who would have guessed that the real estate market would appreciate in some cases by 25% year-over-year, especially during a pandemic?
And yet, that’s exactly what took place in 2020. So should we expect the same market trajectory in 2021? Using the same guidance for 2020, probably we could expect another series of disparate shifts within the market without a lot of logic behind it.
So moving forward, here are some fundamentals:
■ Inventory continues to bottom out at historic low levels.
■ Interest rates will continue the flat line between 2.8% and 3.4% for the next 12 months for a fixed 30-year home mortgage.
■ The economy will continue to recover but slowly, adjusting for fewer service positions since restaurants and hospitality businesses will continue to struggle.
■ Construction of new homes will continue at the same level but because of constrictions of skilled labor and increased prices for building materials, the number of homes built will be measured, to say the least.
■ Evictions will continue to overhang certain sectors of the real estate market as 30 to 40 million Americans are reported to be at risk of eviction, based upon the Aspen Institute report.
■ Demand for new homes in the 4th quarter has been, for many builders, at a record pace. Toll Brothers reported for the most recent quarter a record number of signed home contracts, the most in the company’s 53-year history.
■ Even though housing prices in California have been increasing over the last 12 months, other states are starting to take over for price appreciation as migration from places like California, New York and even Chicago bring new buyers in two places like Reno, Nevada, and states like Texas and Florida.
■ In addition, cost of living factors are also driving people from places like the Northeast and Southern California to lower price markets such as Florida, Texas and North Carolina.
■ According to a report by Toll Brothers, places like Jersey City, Hoboken, Manhattan and Brooklyn are seeing a slowdown.