The housing market exploded in 2020, with seller inventory falling and buyer demand driving home prices up. Here's what's happened in 2020 and what's likely to happen come 2021.
Housing inventory
Though 2020 started off like a pretty typical year in terms of the housing market, inventory took a dive once the coronavirus pandemic reared its ugly head. General economic uncertainty combined with the hazards of showing homes prompted sellers to pull back on listings. The result? Housing inventory has been on a steady decline since spring.
Here's what housing inventory looked like from January through September:
For context, a four- to five-month supply of homes makes for a more equalized housing market, while lower inventory gives sellers the upper hand. In 2020, housing inventory has been down 32.5% compared to 2019, which explains why some prospective buyers have struggled to become homeowners.
Home prices
Limited housing inventory has fueled a surge in buyer demand, which has driven home prices up. Mortgage rates have played a role, too. The 30-year mortgage rate averaged an almost unbelievable 2.81% for the week ending Oct. 15, 2020. One year prior, it averaged 3.69%.
Here's an overview of how home prices soared between January and September 2020:
Data source: National Association of Realtors
All told, home values are up 14.8% from the previous year. Not surprisingly, bidding wars have been a fixture of the housing market in 2020, thereby driving prices up further.
What's next for the housing market?
Whether home prices continue to climb will depend largely on inventory and mortgage rates, which are both likely to stay low well into 2021 and possibly beyond. An improvement on the coronavirus front, however, could result in an uptick in inventory, which means the market may open up in the new year, giving more entry-level buyers a chance to capitalize on competitive mortgage rates.
Uncertainty around the November election may have also led to a decline in home listings for the third quarter of 2020. Postelection, we may see inventory open up on a limited basis. The winter months tend to be sluggish with regard to home listings and sales, but come spring, we may see more sellers willing to put their properties on the market. A lot, however, will depend on how the economy fares in the near term, and the results of the upcoming election will play a role there, too.
What should buyers take away from all this?
2020 has been a challenging year to buy a home. If mortgage rates hold steady into 2021 and inventory slowly but surely opens up, buyers will have a lot more opportunity in the coming year than they did in the previous year.
Source: Maurie Backman - MillionAcres
As usual, should you be interested in buying or selling a home, or for any further information regarding your home, please contact me, Karen Borden, your North Alabama Real Estate Professional!
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