What You Should Know About Buying a House in 2021
Any predictions that were made about home buying in 2020 went out the window due to the pandemic.
And we’re not out of the woods yet.
This year will be one of transition for the real estate market. Here’s what to expect with buying a house in 2021.
What Do I Need to Know About Buying a House This Year?
Besides taking stock of your financial situation, there are several aspects of the housing market to consider if you’re thinking about buying a home in 2021: supply and demand, home prices, mortgage interest rates, and lending standards.
Low Supply, High Demand
The scenario for 2021 is similar to what we saw happen in 2020. The supply of houses is expected to stay low, while the demand for inventory is predicted to remain high. It will still be a seller’s market, so you’ll have to act fast if you find a home that’s in good condition and your price range. You need to be prepared to compete with other buyers, make concessions to stand out, and pay a higher price.
Housing inventory will stay low because employment and economic uncertainty have caused homeowners to delay putting their homes on the market. A moratorium on foreclosures because of the pandemic has also prevented more homes from becoming available. When it comes to the supply of new homes, construction hasn’t been able to keep up with the demand.
Buyer interest will remain high as long as low mortgage interest rates stick around. Prospective homeowners can shave hundreds of dollars off their monthly payments when they take advantage of low rate loans. There’s also a continued need for comfort. Families that are still working and learning from home will be looking for more space to spread out.
Home Prices Going Up
Though low mortgage interest rates continue to attract potential buyers, home prices are projected to increase by 3% this year, according to the National Association of Realtors. This makes finding an affordable home more difficult, especially for first-time buyers. This rise in home prices can be traced back to the aforementioned low supply and high demand.
Even though you may be able to secure a mortgage with a low-interest rate, you could end up going over budget on a home because of intense buyer competition. Because supply is expected to remain low for some time, you need to figure out ahead of time what you can live without instead of trying to check off every item on your list of dream home criteria.
Waiting for more housing options to come along later in the year after construction picks up and people feel more confident about putting their homes up for sale may not be a good idea. Not only are home prices expected to rise, but mortgage interest rates are also predicted to inch higher. However, if you buy a home a few months down the road, you’ll have time to save more for a down payment and build credit.
Mortgage Rates Rising
Mortgage interest rates fell to historic lows in 2020. However, we’re already seeing a slight uptick in 2021. Rates are expected to average 3.1% this year, according to the National Association of Realtors. The Mortgage Bankers Association’s prediction is a bit higher at 3.3%. At the end of 2020, rates averaged 2.95%, according to Bankrate.
As more people get vaccinated for COVID-19, employment and the economy are expected to rebound, which stirs inflation concerns. Mortgage interest rates typically correlate with the 10-year Treasury rate, which climbed to a nearly 10-month high in January. If that trend continues, mortgage interest rates will likely also rise.
When it comes to mortgage interest rates, even a small increase can make the overall cost of a loan substantially more expensive. For example, there are tools you can use online to see the difference between a 2.95% rate and a 3.25% rate. If there’s a little wiggle room in your budget, you may want to consider acting now rather than later.
Tighter Lending Standards
Because of the economic uncertainty brought about by the pandemic, lenders are getting more particular about who gets loans. As the unemployment rate rose in 2020, so did mortgage delinquency rates. As a result, many banks are looking for higher credit scores while offering lower credit limits.
You can put yourself in the best position to obtain a mortgage by understanding your credit score. Make sure all of your accounts are current. Don’t take on new debt. Avoid making other credit inquiries. Having a sizable down payment can also work in your favor. The lender will see less loan risk if you’re invested in the property.
Getting pre-approved for a loan is a great way to stay competitive with other buyers. If you’re able to pay the asking price, make the down payment, and have a lender waiting in the wings, you will appear to be a solid choice to the seller. Pre-approval involves filling out a mortgage application, doing a credit check, and figuring out an estimate of the down payment.
What You Should Know About Buying a House in 2021
Now you know what to expect if you plan on buying a home in 2021 as we transition from the year of the pandemic to a year of prosperity.
Inventory will stay low for some time, and demand doesn’t look like it will wane any time soon. Home prices are expected to climb along with mortgage interest rates. And getting a loan may be tougher than it was before COVID-19.
Whether you’re looking to buy or sell a home, New Again Houses can help. We can buy your home for cash and close in a matter of days. Contact us today to get started!