As 2020 has shown us, predictions are unreliable at the very least. But with 2021 on the horizon, the crystal balls are out for forecasts for the US property market next year. All come with caveats and every single one dependent on the evolution of covid-19. But in general terms, 2021 looks set to be a year of rising prices, sales and inventory.
Higher prices in the US property market in 2021
The latest predictions from realtor.com expect house price rises to continue throughout next year. However, without the double-digit hikes that the US property market has seen in 2020. The online property portal forecasts a 5.7% increase in 2021.
"Home prices can’t outpace income growth indefinitely,” said Danielle Hale, Chief Economist at realtor.com. “The higher prices rise, the harder it is for more buyers to get into the market and this tends to dampen demand."
Rising prices will bring little relief to homebuyers, already hard hit by the continual price rises this year. An additional obstacle will come in the form of rising mortgage rates. realtor.com predicts interest rates of 3.4% by the end of 2021, up 0.7% from the current 2.72%.
More choice on the market
But although they will be battling with rising prices, would-be buyers will not have to contend with such tight inventory levels. As vaccinations continue and the pandemic lessens, more homeowners will put their properties on the market.
In addition, most new single-family homes will reach completion adding extra supply to the market. 2020 has been the year of new-build single family properties in the US.
realtor.com predicts more of the same in 2021 when single-family home starts will increase by 9%. However, the portal points out that the US property market in 2021 will have a deficit of 4 million homes.
More sales in 2021
More to choose from on the market will push sales up still further in 2021. If 2020 has seen constant increases in the number of property transactions, next year will be no different.
Predictions expect sales to go up by 7% across the market as demand remains at high levels. Shifts in lifestyle during the pandemic will continue to favour the suburbs rather than city centres. And the need for larger homes with more outdoor space will stay at the top of many buyers’ must-have lists.
The US property market in 2021 will continue to present excellent opportunities for investors looking at buy-to-let and build-to-rent options. Both have shown strong returns this year as supply has plummeted in the face of record demand.
At BRIC Group, we expect 2021 to offer similar potential. The lack of available housing and rising prices make it difficult for buyers to enter the market, particularly first-time buyers. This creates extra need for rental property.
The chronic lack of single-family homes and housing shortage also opens up build-to-rent investment opportunities. Properties in sought-after locations are particularly attractive.