Home Prices: What happened in 2020? What will happen this year?
Hi, my name is Kevin Yoder, owner and CEO of Yoder Real Estate powered by EXP. Of all the questions that we get each and every day in real estate, this is the one that rises to the top. And, most folks want to know whether they’re selling a home or not what’s going to happen with home prices.
So, let me answer this for you. First, let’s talk about what happened in 2020. So towards the second half of last year, buyer demand went through the roof and inventory of homes, these are the homes that are available, hit record lows. Now, the reason why is because of supply and demand and the price of anything is always determined by the supply and demand ratio. Whether it’s a loaf of bread on a shelf, or in this case, a house on a street. Whenever there’s limited availability, demand goes up and so does pricing.
So, because of this home prices nationwide hit the largest annual price increase in history for three reasons. Low interest rates, of course, below 3% is always going to keep buyers moving and taking advantage of those low mortgage payments. Two, pent up demand from home buyers. Those that were wanting to buy, but they couldn’t because of COVID-19. And three of course, limited housing supply. This led to appreciation of about 10% nationwide, which put about an extra $24,000 into most homeowners equity positions across the country.
So, what does it look like for 2021? Buyer demand will soften, mostly as a result of interest rates going up slightly. Now, by the way, these are the forecasts interest rates going up, which means that buyer demand will soften slightly and inventory challenges will ease because of more listings coming on the market.
Where are these listings going to come from? Three areas. Number one is homeowners who didn’t sell last year. There is a portion of those sellers, a high percentage that couldn’t sell in 2020. And, now that things are starting to open up a little bit and the concern for selling during a pandemic is actually starting to ease a little bit, though some of those sellers will come on the market this year. So that’s category one. Number two, housing starts according to the National Association of Home Builders, there will be nearly 1 million housing starts this year, which is basically new home builds. And, that’s the most that it’s been since the beginning of the great recession. So that’s a big factor is new construction. And three, those impacted financially by the economic crisis. So there’s a couple of categories there, those that are actually going into foreclosure before COVID-19 hit and two, those that didn’t take advantage of the forbearance programs that were made available to homeowners as result of the relief programs of COVID-19.
So, 2021 appreciation forecast about 6%. So not nearly as hot as 2020, but still a 6% across the board. Now, by the way, real estate is very local. It’s highly local by area by area. Geographic specific, city by city and oftentimes neighborhood by neighborhood. If you want to know what your home’s value is in your neighborhood, give us a call here at Yoder Real Estate. You can find us online at yoderrealestate.com and ask us about our easy move program, which is where we give our sellers, we negotiate at least a hundred days for sellers to stay in their homes after they have their offer accepted. So they can move from home A to home B with ease.
If you have any real estate questions, please connect with us here at Yoder Real Estate, we’re here to help and have an awesome spring and we’ll see you soon.
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