Predictions for a Hot Winter
The long-awaited New Year of 2021 is finally here! While 2020 was challenging in so many ways, the booming real estate market was a bright spot (extremely busy, but also bright) that is likely to continue.
Let’s look at the evidence for a hot winter real estate market:
Jerome Powell, Chairman of the Federal Reserve, said on December 16, “With regard to interest rates, we continue to expect it will be appropriate to maintain the current 0 to 1/4 percent target range for the federal funds rate until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.1” So it appears rates will stay extremely low in the near future.
With more white-collar employees working from home during the pandemic, the need to live close to one’s workplace has disappeared. This has led to tens of thousands of people moving to more affordable areas of the country. By some measures, big cities (New York, San Francisco, Chicago, Boston) are down 22%-33% in terms of online meetings in those locations2.
Housing inventory is still low - down by over 39% nationally in November as compared to 2019. The seller’s market remains strong, with homes being snapped up more quickly3. Homebuyers are also paying more, with the average listing price up 13.3% over the previous year4.
To respond to demand, new residential construction has increased significantly (comparing Nov. 2020 to Nov. 2019). New housing permits are up 8.5%, while new housing units started have increased by nearly 13%5.
And there are still over 19 million homeowners who would benefit from refinancing, according to Black Knight’s analysis (November 2020)6. These are people who already own at least 20% equity, have good credit scores, pay on time and can reduce their interest rate by at least 0.75% by refinancing.
We hope you got some rest over the winter holidays, because it doesn’t look like demand will be slowing down anytime soon. Obviously, any forecast is a reasonable projection of future results based on as much empirical data as possible. No one really knows what will happen this year, but, based on the evidence, it appears we’re all in for a hot winter!
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