Housing Prices Continue to Climb, This Might Be the Reason
The housing market is always a bit of a wild ride, and 2021 could be no different from the past. Yet there are some significant trends impacting the real estate industry in 2021 that you should know about according to the Local Records Office in Norwalk, California.
From the shrinking sizes of baby boomers’ houses that they are selling to the rise of millennial homebuyers as a potent force, 2021 could be an inflection point in the narrative that the younger generation is not interested in buying a home. Here are five key trends realtors identified as being trends in this dynamic industry.
Construction Supplies Shortage
All of the numbers are looking great for a construction boom to take place in 2021. In fact, we haven’t seen numbers like this since 2007. For those of you that remember, 2008 was the start of the housing crisis. Why confidence? A strong economy and high employment numbers are buoying a mortgage market that is finally starting to regain the footing it lost during that crisis.
Another number that underpins this is the trends we saw in the fourth quarter of 2019. Mortgage applications for new homes rose 27% during that month. Further, homebuilder confidence is reportedly at a 20-year high.
The bad news? Home prices are still expected to rise from between 3% or more on average which means that those consumers who are holding out for a “better deal” might find themselves paying markedly more in the near future than they had imagined.
Forbes quotes Managing director and global head of index investment strategy at S&P Dow Jones as saying the following regarding home prices.
The Size of Baby Boomer Properties Continues to Shrink
According to the Local Records Office, we’re also seeing a huge generational shift in the way that people own properties. The baby boomer generation, for example, is moving into more compact, easy-to-manage properties than their older and much larger houses. This is having major impacts on everything but it also represents a real opportunity for buyers in some markets to get more of a house than they thought possible.
How so? As boomers drive the boom in the “sunbelt” region, many are anxious to do so. This creates a situation where you have a market with eager sellers and still-need-some-convincing buyers.
Marketing to Millennials
Speaking of those buyers that still need to be convinced, it looks like the millennial generation is finally starting to hone in on the benefits of owning a home and more and more of that cohort are starting to look into how to buy a home. Historically aggressive rates and a lender market that is all-too-eager to approve solid borrowers buoy this.
Surveys have shown that millennials are willing to cut back on spending in order to be able to save money for their own home. Two factors have worked against the millennials in previous years and those are the rising prices of homes in general and, in particular, in the most desirable cities. It leads to a unique situation where people have stable jobs and income but no access to the real estate market due to the starting prices of properties being $300k and above.
While this trend isn’t abating too much, one trend that is pushing millennials to purchase a home for them is the fact that rents are also rising at a historical clip – and especially in the most desirable areas of the country.
Nonetheless, increased inventory projections, as well as a boost in the willingness of the millennial generation to buy a home, means we will see more and more of this age group buying homes in 2021.
Gentrification Continues in the Cities
The biggest single salient trend that we expect to continue emerging in 2021 and beyond is that gentrification will continue in the nation’s largest cities and their most desirable neighborhoods. Washington, DC, Forbes reports. Of course, one major factor weighing on the minds of many potential homebuyers and real estate investors is the upcoming 2021 changes due to the pandemic.