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When the pandemic hit the U.S. in the first quarter of 2020, the economy stalled, and homebuying and selling ground to a halt. People spent more time at home, shielding themselves from the uncertainties of the coronavirus, and by the time the real estate market came alive again, people were ready to buy. According to an August 2020 survey by Redfin of 1,000 people who were planning to buy a home within the next 12 months, 25% of respondents stated the pandemic caused them to want to move or speed up their moving timeline, and 17% indicated they were interested in looking for a less expensive home.
Read: 40 Cities That Could Be Poised For a Housing Crisis
This increase in demand for homes caused listing prices to climb, and that trend has continued through the first four months of 2021, due to the pandemic-fueled desires of people wanting a new home coupled with continued low-interest rates.
While the U.S. housing market is booming, that doesn’t mean that everything’s coming up roses for everyone involved. Tyler Forte, founder and CEO of Felix Homes, offered this insight into what will happen the rest of the year.
“2021 will be defined by low-interest rates and low inventory, a perfect storm that will continue to push home prices higher,” he said. “For buyers, this means homes going under contract in days if not hours. It means multiple offer scenarios where you are up against five, 10, 15 or more competing offers.
See: Interest Rates Are Super Low – Is Now the Perfect Time to ‘Flip’ a House?
“For sellers,” he continued, “low inventory will mean their home should sell pretty quickly and for a great price. The trouble is, once it sells where do you go? Home prices are high across the country so it’s not like you will be able to find a great deal by moving out of state.”
Here’s more on what the housing market looks like so far this year and what will happen next.
Interest Rates Will Remain Relatively Low
The pandemic brought about the lowest 30-year fixed-rate mortgage average in U.S. history. It plummeted to 2.65% in January 2021, down from 3.64% approximately one year earlier. And while it did climb to an average of 3.18% at the beginning of April, by the end of the month, it was back down to 2.98%.
Check Out: The Cheapest Home Improvements You Should Make Before Selling
“Interest rates will continue to rise but remain low through 2021 and possibly 2022,” said Bruce Ailion, realtor and attorney. “Any significant slow down in mortgage applications or housing sales will be responded to by interest rate reductions.”
Home Inventory Will Increase
The average total “for sale” housing inventory for January was 895,381, dropping to 822,790 in February and 808,071 in March. It’s expected that home inventory will increase — but not at breakneck speed. It stands to reason that after selling their home, many of those sellers will turn around and buy another home.
“We are still in an unbalanced market where there is a low inventory of homes available and multiple buyers for every property that is for sale, which I anticipate will carry through the entirety of 2021,” said John Piazza, broker/owner of RE/MAX Classic Realty in Somers, New York. “As we approach both the spring and summer months, more inventory may come onto the market, stabilizing the supply side.”
More: 20 Key Signs That Your House Is Losing Value
It Will Remain a Seller’s Market
As vaccines continue to be administered, businesses reopen and regular unemployment claims continue to steadily fall, consumer confidence is growing, which means that more sellers may start entering the market.
“This is the time for sellers to leap off the fence, said Jen Cameron, 22-year luxury real estate broker. “With the market so heavily in your favor, sellers, there has never been a better opportunity to cash out or move your real estate investments into the next opportunity. Homeowners need to be inspecting and preparing their homes now to get them on the market as soon as possible. With the number of buyers out there in the market, I expect a continued sellers’ market through the remainder of 2021.”
But Cameron also acknowledged that the seller’s market won’t last indefinitely.
Read: 50 Housing Markets That Are Turning Ugly
“Get moving and ride this wave,” she said. “None of us have a crystal ball to predict the future with 100% accuracy, and real estate tends to cool off in winter. Now is your chance.”
Home Prices Will Continue To Climb
In January, the median home list price in the U.S. was $330,500. It climbed slightly to $331,830 in February and even more so in March to $338,830. If the average month-over-month change stays constant, the median list price will reach $379,112 by the end of the year, according to a recent GOBankingRates study on the U.S. housing market.
Of course, these figures represent the median across the U.S., so your local market may be trending higher or lower.
See: 45 Great Cities With Shockingly Cheap Real Estate
Lumber Prices Will Remain High
“For homebuilders, 2021 will be defined by surging material costs,” Forte said. “Lumber prices have gone through the roof.”
Just like in many other goods industries, the pandemic caused sawmills to limit production. At the same time, Americans were spending the majority of their time at home, and do-it-yourself projects skyrocketed, spiking demand for things like lumber. Then, when real estate transactions started up again, people were faced with a lack of homes to buy. That, and the historically low interest rates, inspired some buyers to turn to new home construction, which further depleted the waning lumber supply. The demand vs. supply issue for lumber is still so great that sawmills have not been able to catch up, which means a continuing shortage and high prices.
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Last updated: May 3, 2021
This article originally appeared on GOBankingRates.com: What the Housing Market Looks Like So Far in 2021 — And What That Means for the Rest of the Year