Page 41 - Westchester Relocation Guide 2021

REAL ESTATE
TRENDS FOR THE
2021 HOUSING MARKET
Joe Rand
Chief Creative Officer, Howard Hanna | Rand Realty
The regional housing market was extraordinarily volatile in 2020, with the pandemic’s impact roiling the market for much of the year. In the end, though, the market finished the year strong, with sales up from last year and a significant surge in price appreciation.
So what will happen in 2021? Here are the trends we see continuing through the year:
1. Strong Buyer Demand
Buyer demand is as strong as we have seen it since the height of the last seller’s market 15 years ago. Even in the midst of the pandemic lockdown, buyers were still finding ways to purchase homes through virtual showings, with some actually buying homes sight-unseen. And once the lockdown ended, the market exploded with all the pent-up demand that had been held back during the height of the pandemic, coupled with a flood of new buyer demand coming from urbanites in New York City looking
for open spaces.
2. Low Levels of Inventory Listings were way down in 2020, especially during the height of the pandemic when homeowners were quarantined in their homes. Inventory started to catch up in the summer and fall, but we are still well below the levels that signify a balanced market. With prices rising, homeowners on the sidelines might start to see the opportunity to put their homes on the market, which will ease the shortage.
But until then, we’re going to have too many buyers chasing too few listings, which will lead to....
3. Continued Price Appreciation
The regional market was starting to show some clear signs of robust price appreciation in the first quarter of 2020. Then, once we got through the height of the pandemic, prices spiked from a combination of high levels of buyer demand, low inventory, and falling interest rates. We don’t think the double- digit rates of appreciation we saw in the summer will continue, but we believe that prices will continue to go up through the next year.
4. Historically Low Rates Interest rates were historically low in the mid-2000s, at the height of the last seller’s market. Then they went down after the financial crisis. Then they went down again. Then again. Yes, rates are now at even lower historic lows, regularly below 4%. This is great for both sellers and buyers, because it helps support higher prices for sellers while still keeping monthly payments manageable for buyers. The Fed has committed to
maintaining low interest rates for the next few years, so we don’t see that changing anytime soon.
5. Once-in-a-Generation Affordability
Finally, the best news of all is that these low interest rates have made homes in our market more affordable than in a generation. In the graph below, we calculated the monthly payment required to buy a home in each regional market going back as far as 1981, based on (1) the average price for a home that year, and (2) the average interest rate for a 30-year fixed rate mortgage for that year. Then we controlled for inflation. The result is the monthly payment required to buy an average-priced home right now is as low or lower than at any time since at least 1971.
Why? Because prices are well below their heights if you factor in inflation, and because of those ridiculously low interest rates. That’s great for buyers, because it makes homes more affordable. But it’s also good for sellers, since it means that more buyers can meet rising asking prices while maintaining the same monthly payment. And that’s good for everyone.
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