9 Predictions for the Real Estate Market in 2021
Here, I’m going to lay out for you my nine predictions for the real estate market in 2021. I’m going to look into my crystal ball and tell you all about what I think’s going to happen in your wonderful real estate future. And I’m even going to talk about why the market’s so hot in the middle of a global pandemic.
1. It will continue to be very hard for buyers to buy houses and very easy for sellers to sell their house.
It’s been that way this whole past year and my bet is that it’s going to stay that way. It’s not going to change. Right now, in Phoenix, there are 5,422 active properties on the MLS. And there’s six million people in Phoenix and only, slightly more than, 5000 are selling their home (come on people help us out). It’s even crazier if you’re a realtor. There are some 43,000 realtors in Phoenix. So, there’s one house for sale for every eight realtors. But on a side note, if you want to be a realtor who actually helps get those houses sold, we’re hiring right now and looking for some new talent.
2. Your home next year is going to be 17% more valuable than it is today.
I’ll bet you a burrito on this on that I’m not wrong. If you just me a message, I’ll take that bet. I think the market is on an absolute tear and it’s going to keep getting better. The market has had 12.77% appreciation over the last year and San Diego has seen 11.6% appreciation. So, I’m making my 17% bet for both Phoenix and San Diego. We have this measure called the Cromford Market Index that measures how hot the market is. Last year 2020, the average was like 280, which is freaking hot. And right now, it’s at 460, which is so high they had to change the scale on the index.
So, this is all good news if you’re a homeowner. But this is really bad news, if you’re wanting to buy a house and you’re planning to wait around for a year, because for the same house, you’re going to pay 17% more. If you’re on the sidelines, I would suggest you get going soon.
3. Rents are going to go up a lot.
I think they’re going to go up somewhere between 17% and 19%. Last year they went up 17%.
Right now, everyone wants a home in Scottsdale. I take five or six calls a week from folks looking to move here. They’re all looking for a really beautiful place to live. Because of all this demand, we’re seeing massive amounts of appreciation. And that’s not going to stop this year.
4. Interest rates are still going to be awesome!
Indeed, they are. You’re not going to miss out on the interest rate party. Interest rates are probably going to be around 1.9 or so it seems, which would be crazy. Right now, we’re in the high two’s and low three’s, depending on credit and all that, but that’s not going away. We’re going to see great rates continue.
5. Near the end of the year, things are going to slow down.
I think, we’re going to start to see the market, which is really, really hot, start to slow down. It used to be crazy, but it won’t be quite as crazy toward the end of the year.
6. Why things will slow down near the end of the year.
This is sort of my explanation for number five. Things are going to slow down because interest rates aren’t going to get any higher while the cost of homes will continue to go up. We’re going to see 15% or 20% appreciation while people’s wages, on average, are only going up about 6%. And when your wage growth is getting doubled or tripled by your home appreciation, that’s a recipe for people not being able to afford houses. Eventually you’re going to see people drop out of the game because they just can’t buy and that will cause demand to go down, which will cause the pressure on prices to decrease a little bit. I also think there’ll be a lot of investors who will start to cash out.
7. Why there’s not a Coronavirus-inspired real estate bubble
I’ve done lots of videos on why there’s not a bubble or why there are not foreclosures coming, so take a look at our blog. But, back to it, I get about a call every two weeks from somebody who goes, “you know, I’m going to wait until prices go down.” That’s a mistake, I’m telling you. They’re not going to go down. This is a very different situation than we experienced in 2005, 2006, and 2007. So don’t wait around. You’re going to miss the boat.
8. If you’re looking to buy a house, I would buy it.
Now, this really is more advice than a prediction, but I think right now is a great time to buy. I think prices are going to keep going up. So, if you’re buying or thinking about buying an investment property, I think now’s a great time because rents are going up very quickly. Plus, it’ll likely be worth 17% more next year. If you’ve got a house now, though, I wouldn’t sell. I’d sit on that bad boy and just enjoy the ride as prices rise, unless you have a good reason and life dictates that you ought to sell that thing.
9. Why all this is happening.
The first part of this is that builders have been sitting on the sidelines for like ten years. Builders got it handed to them in 2008. Many went bankrupt and stopped building houses. Now, because of this we have an undersupply of properties. Buyers have been on the sidelines. So, millennials especially, we’re kind of famous for this, we’re living with, like, eight roommates, right? It’s like an episode of New Girl. Gary Vaynerchuk is talking about how cool it is to never buy a house. But then COVID hit, and they realized, “Hey, I want somewhere to live that I can call my own that doesn’t have 85 people living here.” And so, the mass started coming into the market to buy properties.
And that’s a real driver of demand right now, low interest rates. The next reason why demand is going to be increasing is because you can buy the same house you could have a year ago for cheaper, even though it’s more expensive because interest rates went down. So that’s a big deal.
Lastly, because of the coronavirus, people aren’t buying services as much. They’re not flying, going on vacations, getting massages, going restaurants, or whatever. They’re taking all that money and either saving it or spending it on stuff. And one of those things is houses. We’re starting to see prices really reflect that as well. So, I think that’s why this is happening. And those are all like kind of common sense reasons that do not spell a bubble. Plus, and I can tell you from experience, that getting a loan right now is hard. You really have to be able to qualify to get a loan.
So, those are my nine predictions. And send me a message if you want to enter the burrito bet. Also, if you’re looking to buy a home or you have to sell your home, let us know and send us a message. We’d be happy to help you out in the Phoenix or San Diego areas. And if you’re a real estate agent looking to get on a great team in either of these areas, drop us a line. We’d love to chat with you all either way. And may 2021 be better than 2020!