The U.S. housing market could be hot during the summer of 2021, and for a number of reasons. Attractive mortgage rates, vaccine distribution, and rebounding consumer confidence are just a few of the factors that could make the summer 2021 real estate market sizzle.
A Hot Housing Market Expected in Summer 2021
Low mortgage rates. A limited number of homes for sale. Vaccines and job growth. These are some of the leading factors that will influence the U.S. real estate market during the summer of 2021. Let’s take a closer look at these trends, and how they might affect home buyers and sellers this summer.
1. Low mortgage rates expected throughout 2021.
During the first week of January 2021, the average rate for a 30-year fixed mortgage loan sank to an all-time record low of 2.65%. Rates have risen since then. When this article was published, in mid-March, the average rate for a 30-year home loan was around 3.05%. But even that is considered low from a historical standpoint.
Two years ago, for example, 30-year mortgage rates were averaging 4.31% — quite a bit higher than where they are today. Today’s rates are still very attractive, from a home buyer’s perspective. They’re expected to hover within the low 3% range throughout 2021. This could give the U.S. housing market a boost through spring and summer of 2021.
In January, economists from the mortgage-buying corporation Freddie Mac predicted that 30-year loan rates would average around 3% for most of 2021. A more recent February forecast, this one from the Mortgage Bankers Association, predicted that rates could creep upward to around 3.4% by the end of 2021.
This is one factor that will help heat up the summer 2021 housing market. Mortgage rates are still low enough to attract and motivate home buyers. But there’s also an expectation that they’ll rise a bit toward the end of this year.
2. There aren’t enough homes for sale to satisfy buyer demand.
As we wrote in a previous report, we are still seeing seller’s market conditions in 2021. Inventory shortages have a lot to do with this. In most cities across the United States, there aren’t enough homes listed for sale to satisfy the demand from home buyers.
This imbalance puts upward pressure on home prices, while increasing competition among buyers. These trends will continue to affect the housing market into summer 2021. They’ll also give sellers the upper hand, when it comes to negotiations.
In March, the research team from Realtor.com published a report that showed a steep drop in inventory. According to that report, the total number of active real estate listings in the U.S. dropped by -51% over the past year. In other words, housing market supply shrank by roughly half from March 2020 to March 2021. Some metro areas have seen an even greater decline in supply levels, over the past couple of years.
According to Realtor.com CEO David Doctorow:
“In an environment where the number of homes listed for sale is limited and affordability is becoming more of a concern for many, the competition to find the home of your dreams is greater than ever.”
In addition to boosting home prices, these trends make the housing market much more competitive for buyers. When demand greatly exceeds the available supply, we tend to see things like multiple offers, bidding wars, and offers above the list price. There was plenty of that during the latter half of 2020, and it will likely be a factor for the U.S. housing market during the summer of 2021.
3. Vaccines are helping the country move toward normalcy.
We have more vaccines available today than a few months ago, and they’re being distributed more efficiently. Granted, it’s still a herculean task to get vaccines into the arms of all Americans who want one. But we are gradually moving toward that goal.
According to a March 14 New York Times report:
“In the past month alone, the rate of vaccinations has ramped up about 40 percent, to an average of 2.3 million shots a day as of Friday, up from an average of about 1.7 million shots a day on Feb. 12, according to a New York Times database.”
Ongoing vaccine distribution will allow states to ease economic restrictions and business closures. As we continue to tamp down the coronavirus pandemic, the housing market will get an additional boost. We should see higher employment levels going forward, as the economy gradually reopens. This will put more Americans into a position where they can buy a home.
4. The U.S. economy is gradually adding jobs.
We have a ways to go before the job market fully recovers from the coronavirus restrictions and resulting layoffs. But we’re getting there. In the summer of 2021, the U.S. housing market will likely benefit from ongoing job growth.
In February 2021, the U.S. economy gained more jobs than expected — nearly 380,000 of them, to be exact. Most of those gains occurred within the hospitality and service industries, which were hit hardest by COVID-related restrictions. Slowly but surely, those jobs are coming back.
As of February 2021, the U.S. unemployment rate was down to 6.2%. That’s a big improvement over the 14.8% unemployment reached during April of 2020.
The bottom line here is that the economy is slowly recovering, and that will help drive demand within the housing market during the summer months.
5. Consumer confidence is on the rise.
Home buyers have to feel good about the economy (and their place within it) before they’re willing to make a purchase. And there is good news on this front as well.
Consumer confidence indicators recently rose to a three-month high, during the month of February 2021. Confidence will probably continue to rise going forward, as we move through spring and into the summer of 2021. The housing market will likely get a boost from this trend as well.
According to Jennifer Lee, Senior economist for PMO Capital Markets:
“Look for consumers to become increasingly confident in the coming months, as the economy reopens and the vaccines are distributed. Warmer weather won’t hurt either.”
So there you have them, five reasons why the summer 2021 housing market could be a hot one. Home buyers planning to enter the market during the summer months should expect stiff competition from other buyers. Sellers, on the other hand, will continue to enjoy their market leverage for the foreseeable future.
Disclaimer: This article contains predictions and forecasts relating to the U.S. real estate market in 2021. They are the equivalent of an educated guess and should be treated as such. HBI makes no assertions about future housing trends.