2021 Real Estate Market Forecast

Karen D. Friedman
Jan 18, 2021
5 min

To say that 2020 has seen its share of problems is an understatement.

Covid-19, a devastating pandemic that impacted many areas of people’s lives, also influenced the real estate market in 2020. This pandemic struck the nation hard medically, emotionally, and financially.

With the lockdown and the stay-at-home orders, many people found themselves unable to work. This also affected the housing market.

Many people were unable to pay their rent or keep up with their mortgage payments.

Even with all the challenges, real estate always finds a way to adapt and continue with a shifting market.

We’re about to say something crazy.

But, we predict that this year is the best year to get your real estate license.

Let's review what happened in 2020 and discuss what we can expect in the 2021 real estate market.

The 2020 Real Estate Market Review

Although we encountered issues in 2020, the market created unique advantages for both buyers and sellers.

These factors contributed to the market interest on both sides. Let’s start with the buyer advantages.

Buyer Advantages

Yes, the real estate market became favorable to people in a position to buy. The reason? Low-interest rates.

The interest rate was consistently low and buyers who could still afford to purchase were taking advantage of it.

Interest rates were varying from 2.5% - 3.0% on a 30 year fixed mortgage. Lower interest rates also meant that buyers were enjoying lower mortgage payments.

People were now excited at the prospect of owning a home. These low-interest rates and low mortgage payments enticed people who may not have considered buying before.  

Because there were more people purchasing, the real estate market was now seeing issues with inventory.

Seller Advantages

This leads us to the seller advantages that the market created.

It’s Economics 101:  High Demand + Low Supply = Higher Prices

Because the inventory started to decrease, it gave an advantage to the sellers. Fewer homes on the market lead to bidding wars between buyers.

Prices on homes started to steadily increase. Sellers were starting to benefit from selling their properties at higher prices.

Because buyers were making multiple offers on the same property, a seller also had the advantage of choosing the best deal.

The 2021 Real Estate Market

So what does this mean for the 2021 real estate market? Who will have the advantage? Nobody has a crystal ball, but we can speculate based on the trends we have seen in 2020.

There is still reason to believe that buyers can continue to enjoy the benefits of low-interest rates.

The average interest rate in 2020 was approximately 2.7% Even with the interest rates expected to rise to the 3% + range in the upcoming year, it will still be favorable compared to the rates in 2019.

The average mortgage interest rate was hovering in the 4% range at 4.13%.  In 2018 the average rate was 4.7%.

Low-interest rates will still invite more people to get into the real estate market in 2021.

Now let’s talk about the value of homes. According to Realtor.com, the data indicates that sellers can expect their property values to climb. By the end of 2020, home values saw a jump to approximately 7.6% over 2019.

To put things in perspective, let’s round down and take an average of 7%. That means a home valued at $1,000,000 saw an increase of $70,000 at the end of 2020.

This is expected to continue into 2021. Realtor.com predicts if the trends continue with low-interest rates, we can still expect home values to increase by 5.7% above 2020.  

This means that homeowners will still be motivated to sell.  Knowing they can get a higher selling price will encourage those looking to downsize.

How to Win in the 2021 Real Estate Market

As a real estate agent, having knowledge of the market and how it’s trending is only one part of the puzzle.  Now you can use this information to your advantage to best serve your clients.

Take the time to get your clients involved in the process. Get them mentally prepared about what to expect. Sometimes they will have unrealistic ideas about what homes are in their price range.

If you are working with buyers, make sure they are stable and financially sound. Have your clients talk to a lender before taking them out to see properties.  

Although the interest rates are low, it doesn’t mean your potential buyers can purchase above their means. Talking with a lender will manage expectations.

Your clients will know how much they can actually afford while still taking advantage of low interest and mortgage payments.

This is also a great time to talk to people who are renting.  With these favorable terms, renters who have not been affected economically, are in a perfect position to get into the market.

The lower mortgage payments are more in line with the rent amounts they are already paying.

With more competition, your buyers may have to make multiple offers before getting an acceptance. One way to make sure your buyers stand out from the rest is by having a strong offer. How to Write a Powerful Real Estate Purchase Offer is within reach.

Final Thoughts on the 2021 Real Estate Market

So, is now the right time to get into real estate? This is a trick question.  The answer is always yes!  

Why? Because the real estate market never “dies.” People will always need to buy, sell or lease regardless of market conditions.  

Whether we’re in a recession or a pandemic, real estate agents know how to analyze the data, adapt, and continue on.

The bottom line is that the market is currently strong and will continue to be strong leading into the new year. Low-interest rates and mortgage payments will still be a factor in 2021. For those who are able, this will continue to be a great opportunity to purchase a first home, downsize or refinance.

Are you looking to become a real estate agent?

Every week, we release in-depth videos to help viewers become successful real estate agents on our CA Realty Training YouTube Channel. Also, if you enjoyed reading this article, we would love if you could share it with a friend who you think would get something out of it.

Karen D. Friedman
Jan 18, 2021
5 min