Redfin CEO Thinks Housing Demand Will Last Into 2021
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Despite historically low mortgage rates, it's been undeniably difficult to buy a home in 2020. The reason? Limited inventory is driving up demand, causing home prices to skyrocket.
Existing home sales rose by 9.4% in September, and the median home purchase price climbed almost 15% year over year, according to the National Association of Realtors. And real estate brokerage Redfin CEO Glenn Kelman is convinced the housing market will stay tight into 2021. That's good news for sellers thinking of listing their homes, but for prospective buyers, not so much.
Why is housing demand so high?
Mortgage rates are extremely competitive right now, so buyers are trying to capitalize on the opportunity to lock in affordable home loans. But that's not all. Many people are fleeing cities in the wake of the coronavirus pandemic and heading to the suburbs to enjoy more square footage. That’s also driving up demand.
Will it be just as difficult to buy a home in 2021?
Many sellers are holding off on listing their homes due to the current unstable economic climate. Others aren't listing their properties because they don't want to deal with the health concerns that come with having potential buyers view their homes in person. Once things start to improve on the pandemic front, we could see an influx of homes for sale, which will help drive down demand and make home prices more affordable. But unfortunately, that may not happen for quite some time.
The uncertainty around the election could also be causing some potential sellers to wait on listing their homes. That won't necessarily resolve immediately once our next president is elected, but Kelman thinks supply will increase following the results of the election and expects more sellers to list their homes in January and February of 2021. By spring, which is typically the most popular time to put a home up for sale, inventory could open up.
But what about mortgage rates? Will they stay low? Without a crystal ball, it's impossible to say. But because the economy probably won't be anywhere close to staging a recovery during the first half of 2021, there's a good chance mortgage rates will remain competitive throughout the entire year -- and possibly beyond. So those who may have struggled to buy a home in the past few months could have more success once 2021 rolls around despite demand likely remaining high.
Set yourself up to buy
If you want to put yourself in the best position to buy a home in 2021, here are few key steps to take in the coming months:
- Boost your credit score. The higher that number, the more likely you'll be to get approved for a mortgage at a competitive rate.
- Pad your savings. Home prices may come down next year, but they'll still likely remain higher than average. Having extra cash on hand could make it possible to buy a home at a time when demand is still surging.
- Pay down existing debt. It'll make you a more viable mortgage candidate and also make your monthly payments easier to handle if you do end up buying.
While we may see high housing demand in 2021, the market could open up just enough to make buying a home more feasible. And if mortgage rates stay low, buyers could have a great opportunity on their hands.
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