COVID-19 has altered the home buying experience, but it hasn’t dampened the hot US housing market. In fact, with so many of us spending more time at home than normal, we may be finding that our current homes no longer meet our needs, and it’s time for an upgrade.
In a recent study by Aceable, 34% of Americans report planning to move in 2021. While the percentage of those who actually move will be lower, this is quite a jump from the 14% of Americans who move each year on average.
How COVID-19 Transformed the Housing Market in 2020
If you read our 2020 COVID-19 and Residential Real Estate Impact Report, you know that COVID-19 has transformed the housing market in a few key ways over the past year.
People are relocating from the cities to the suburbs.
With so many people able to work from home, proximity to the office is no longer as important in choosing a home as it was in prior years.
Today’s buyers are looking for more living space, some outdoor space, and home offices.
Financial uncertainty is driving many people to look for less expensive housing.
Because of low-interest rates and the ability to work from home (whereby opening the option to buy property in more affordable neighborhoods outside of major cities), some people are in a better position to buy today than they were at the beginning of 2020.
Let’s look at how this transformation is expected to impact the housing market over the coming year.
What COVID-19 Means for the 2021 Housing Market
Twenty-seven percent of survey respondents say they plan to buy property in 2021 and 14% say they plan to sell property in 2021. All this buying and selling is great news for a recession-era housing market.
But, as with any recession, financial uncertainty is causing many buyers to watch their expenses. Thirty-eight percent of those surveyed say they expect to pay a lower housing payment than they paid in 2020. For most people, this lower housing payment will come from relocating to a less expensive area. Working from home is a game-changer in allowing people to live further from their place of employment, and many employers have already announced plans to continue having employees work from home when the pandemic is over. So expect to see ongoing interest in the suburbs and smaller cities in 2021.
Smaller Cities Are Heating Up for 2021
Experienced Realtor® Pascale Nejaime is seeing an increase in buyers in her Connecticut market and predicts that New Yorkers and Bostonians will be relocating to smaller cities and towns where they can find larger homes with outdoor spaces. As Nejaime notes, “People are starting to rethink the functionality of their homes. If this virus, or any other virus, forces another quarantine, will I be ok being confined in my house for a couple of months?”
Realtor.com’s annual list of the hottest zips codes doesn’t mention former hotspots like Denver or NYC, where high population density and lack of affordability are turning off today’s buyers. Instead, you’ll find smaller cities like Colorado Springs, Raleigh, and Topeka.
2021 is Expected to Be a Good Year for Real Estate Professionals
Sixty-four percent of those planning to sell property in 2021 plan on using a real estate agent. And with so many buyers in the market for a home, 2021 is shaping up to be a good year for real estate professionals. So if you’ve been thinking about getting your real estate license, this could be the perfect time to start your new career.
The Long-Term Impact of COVID-19 on the Housing Market
While COVID-19 may have changed buyer’s preferences, it’s not caused a major interruption to the hot housing market. The market slowed substantially for about a month in the spring of 2020 when several states stopped all home showings as part of Shelter-in-Place Executive Orders. But with the first wave of the pandemic behind us, many experts are predicting virtually no long-term interruption to the housing market because:
Low interest rates continue to drive high buyer demand, and
The pandemic disproportionately impacted low-income workers who were unlikely to be looking to buy a home; middle-to-high income earners who were in the market for a home are likely still able to buy.
This optimistic outlook applies to major cities as well, despite the increased interest in suburbs and smaller cities. Thirty-five percent of survey respondents say they believe big cities will recover in 2021, while 57% say the recovery will be beyond 2021. But many major cities are already well on their way to recovery. The National Association of Realtors® reports that Boston is already up 122.52% since the onset of the pandemic and Seattle is up 113.73%
With buyer demand driving the housing market, the real estate industry as a whole should weather the COVID recession well over the long-term.
Tips for Buying a Home in 2021
If you’re planning to buy a home in 2021, follow these tips for a smooth buying experience.
Before you even start your home search, get pre-approved for a mortgage loan. This is an important first step under normal market conditions, and it is even more important in the expected economic conditions of 2021.
Consider the reasons for pre-approval:
Your pre-approval will tell you how much you can qualify to borrow, which will confirm the price ranges you can afford for your home search. During the COVID recession, lenders may be tightening requirements, so it may be slightly more difficult to qualify for financing in 2021 than in years prior.
Pre-approval demonstrates to sellers that you’re a serious buyer. When you’re ready to make an offer, your offer carries more weight if you’re pre-qualified because the sellers can be reasonably sure you’ll be able to secure financing to close the deal.
As real estate professional Koki Adasi puts it, “the house you looked at today and wanted to think about until tomorrow may be the same house someone looked at yesterday and will buy today.”
When you find a home you love in 2021, you’ll probably have only a small window of opportunity to snag it before someone else gets to it. This is especially true if you’re looking for the same COVID-friendly home features as many other buyers (lots of square footage, outdoor space, and a home office).
Come in with Your Highest and Best Offer
If you’re serious about purchasing a home, the projected hot market of 2021 isn’t the time to low-ball a seller. In fact, you may even see homes selling for more than the asking price as buyers compete over the comparatively little home inventory available.
So when you’re ready to make an offer, make it the highest amount you’re willing to pay with the best terms you’re willing to offer.
Tips for Selling a Home in 2021
Here are a few quick tips for anyone looking to sell a home in 2021.
Virtual home tours affect an estimated 75% of buyer decision-making and reduce wasted viewings by around 40%. Virtual tours can be as sophisticated as interactive tours with expensive 360-degree cameras or as simple as a smartphone video tour through your home. Your real estate agent will have the connections and skills to get your virtual tour posted online across multiple social media and real estate platforms.
Pricing your home correctly is always one of the most important factors in selling your home, and 2021 will be no exception. Price too low, and you may get low offers. Price too high, and buyers will ignore your listing.
So if you’re serious about selling, price your home in line with comparable homes.
Set the Stage for Emotional Buyers
Despite expert advice to remove emotions from home-buying decisions, buyers are always emotional when choosing the home in which they’ll make their memories. To appeal to buyers’ emotional side in 2021:
Show off your square footage by removing extra furniture that makes the rooms look small.
Highlight outdoor space by creating inviting seating areas.
Stage a home office to help buyers imagine working from home.
And don’t forget to prioritize safety during showings. Have people wear masks, sanitize their hands, and limit the number of people in the home at any given time.
COVID-19 may have transformed the housing market in 2020, but it hasn’t stopped buyers from driving up real estate prices across the country. While suburbs, smaller cities, and towns are seeing increased demand, cities are holding up surprisingly well and are rebounding quickly from the initial slump in the spring of 2020.
For 2021, experts are predicting hot markets from coast to coast with increased interest in suburbs and small cities and a quick recovery for large cities. At this stage, there doesn’t appear to be a long-term interruption to the growth of the housing market because of the coronavirus.
Buyers need to understand that the competition will be stiff in 2021, so it’s best to have finances in order and be ready to move quickly once you find the right house. For sellers, 2021 could be a good time to capitalize on home equity. With the right virtual marketing, pricing strategy, and pandemic-friendly staging, sellers can maximize the profits on the sale of their home.