One of the major story lines over the last year is how well the residential real estate market performed. One key metric in the spotlight is home price appreciation. According to the latest indices,
Will House Prices Go Down in 2021?
Dated: January 25 2021
We all know that 2020 was a little different, not only because of the pandemic and everything that had to go along with that, but also in real estate. We saw record-breaking low inventory, we saw record-breaking low mortgage interest rates, and we saw multiple offers on homes that were going for five, 10, and even $20,000 above list price. It has been crazy. According to a report from CoreLogic, home prices across the country have gone up 8.2% over the last 12 months. The question is now, what will happen and where will home prices go in 2021?
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Right now, we have a very low supply of inventory of homes on the market, but we have a very high demand, which is making home prices high. To give you an example of just how low the inventory is, in Cobb County right now, we have less than 2,000 homes on the market available for purchase right now, while last year at this time we had over 2,500, and this is typically a slow time of year. With such low inventory, it's driving prices up, right? Last year at this time, the average sales price in Cobb County was $325,052, and now it's $352,358. That's over a $27,000 difference in just one year.
Will this happen again in 2021 or not? Let's take a look at the things that could make home prices go down. In 2020, there were millions of people that wanted to sell their house, but didn't because of the virus. As the health crisis eases up and we see the vaccines come out, we will see more and more people become more comfortable with putting their house on the market. Now, if all of these people put their house on the market at the same time, then we will see a huge flip in the supply and demand, meaning more competition for homeowners and the home prices would not be as strong.
Next, some households will be affected financially by the prices and will be forced to sell their homes. We currently have an estimated 2.8 million homeowners who are in forbearance plans. Now, right now, while we do have a hold on any evictions and mortgage forbearances, this will come to an end at some point and the banks will be allowed to foreclose on people again. Once this happens, many of these homes may likely go on the market, and likely for below market value, driving home prices down. Now, this is all up in the air right now and we still don't know exactly what will happen with the foreclosures, but it is something to keep an eye on.
Lastly, interest rates are predicted to go up by the fourth quarter of 2021. As interest rates go up, it limits the buyer's affordability on homes and we would likely see less buyers in the market, making the demand less. If the demand is less and we have more houses on the market, we will not see the increased home values that we did in 2021.
What is the bottom line? Right now, there is still a very limited supply of homes on the market for the very great amount of purchasers that want to buy them. Many forecasters are predicting that it will remain this way for at least the first half of 2021, leaving home prices to continue to appreciate. If you have even thought about selling your home within the next year, please give me a call and let's have a conversation about it. If you are looking to buy a home in the next year, please be prepared and make sure you are working with the right agent who knows how to win multiple offers.
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After 17 years in the Residential Mortgage Industry, I decided to pursue my passion of real estate and join Keller Williams Atlanta North. Real Estate has been a passion for as long as I can remember....
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