Housing Market: 2020 Wrap Up, 2021 Forecast
Nationally, 2020 was off to a good start with high hopes and expectations for the housing market. But this bright outlook went abruptly off into the weeds with the global pandemic and resulting economic downturn. The stay at home orders came at the start of the best time of year for sellers to list their homes for sale, which caused many to postpone their listings during stay at home orders and the overall uncertainty of the times. As a result, in the season when there is typically the most homes for sale, buyers were met with unusually low inventory which continued into the fall. Even with a growing unemployment rate, there were still enough buyers seeking to take advantage of the low interest rates which created a scramble for active inventory and bidding wars, especially in the low to middle price ranges. For markets like ours here in Southwest Washington which has had ongoing inventory shortages for years, the challenge was even greater.
Just as new home construction was reaching highest levels since the Great Recession, the global pandemic hit which put a halt to everything as all but essential workers were under a statewide mandate to shelter in place at home. Even though this was only for a short time, this caused a nationwide disruption to the supply of materials. The resulting demand for materials drove prices higher. Also, banks were tightening up on funds for new development. According to a recent RMLS market report the number of newly built or planned homes in Southwest Washington accounts for only about 30 percent of properties for sale which is lower than around this time last year.
There are varying expert opinions on the outlook for 2021. Some anticipate a boom, while others fear a crash. According to Realtor.com, mortgage rates are expected to increase slightly but still remain historically low throughout 2021. New construction is expected to increase nationally and prices are expected to rise. Normal seasonal fluctuations are expected to return, with a strong spring and summer followed by the usual off season decline of activity.
Based on current factors, a housing crash doesn’t seem likely here in our local market since we lack the typical warning signs such as plateauing prices and excess homes for sale. Despite these pandemic times many of our local experts have described the local market here as “hot” and expect this to continue through 2021 as new construction and development recovers from the abrupt halt. Also, many Realtors have adjusted to a “new normal” under COVID-19 guidelines so that their clients feel more comfortable in the buying and selling process as everyone tries to stay safe and healthy.
Of course, these are just predictions. With an ongoing pandemic still impacting employment and the economy, as well as new presidential leadership, we are in uncharted waters. If we stay the course here in Southwest Washington, the expectations are that inventory will continue to recover from the pandemic halt and buyer demand will remain high as the economy recovers and rates remain historically low.
