If the 2021 home buying market were a card game, the deck would be stacked with wildcards.
The Coronavirus pandemic has caused seismic shifts in the real estate market, spurring a higher demand for more square footage and thus a sudden interest in the spacious suburbs. Interest rates are low, but so too is inventory. Home prices are escalating, but a novel first-time buyer tax credit proposed by President Joe Biden, could be a game changer for aspiring homeowners who need help getting a foot in the door.
Suffice it to say, much is at play in the 2021 real estate market that will affect aspiring first-time buyers who are coming out in droves.
Patience is the key word in this market – for all of us..
As far as who’s shopping for homes this year, millennials will be major players in the housing market, As Analysts point out: The oldest will turn 40 in 2021 and the younger end of the generation will turn 25. As a whole, this group will be on the move, embarking on house hunts as trade-up buyers and first-time buyers.
At the same time, Gen Z buyers (ages 24 and younger) are poised to make an early start into the housing market because, as it turns out, all that sheltering at home helped them build up their savings.
We are going to share with you six things aspiring homebuyers should know about the 2021 real estate market, plus some tips from to help you navigate this unique moment in time:
1. First time buyers may be able to get a tax credit under Biden’s housing plan:
A key aspect in President Joe Biden’s $640 billion housing plan is to increase homeownership by providing up to $15,000 in down payment assistance to first-time buyers. The proposal is unique because buyers would receive the tax credit at the time of purchase, rather than waiting for it until the following year when they file taxes. It’s unclear how soon this credit could be made available or if it will get implemented- so stay tuned...
If the credit does happen it could help remove a major barrier to homeownership as many millennials—saddled with student loan debt and sky-high rent payments—have cited saving for a down payment as the insurmountable challenge that keeps homeownership out of their reach.
Let’s break this down: the median list price in Prineville in February was $375,000. First-time buyers typically make a down payment of about 10 percent, or an equivalent of about $37,500 which is over 10 times the median financial savings of renters, which is $3,100, according to the 2018 Federal Reserve Bank’s Survey of Consumer Finance.
As home prices continue to increase, having enough for the down payment is becoming most difficult. Monthly mortgage payments are not rising as fast due to the lower mortgage interest rates.
2. Homebuying will become even more competitive
An increased demand for homes will make the bidding process even more competitive. Supply is at a historic low, and properties are selling quickly (nationally, on an average of 21 days) and with typically three offers per listing.
So, how can you buy a home in such a competitive market?
It’s more critical than ever to position yourself as a qualified buyer by getting preapproved and having all necessary documents, such as W2s and bank statements available in order to get approved. You have to be ready when that right property comes along, so you can make a quick offer
In this hyper-competitive markets, we can strategize with you to help your offer stand out.
One of the most important tips we give our buyers in a competitive situation is to make no request for repairs and to spell out clearly in the offer that the home inspection is for informational purposes only.
Terms that include a quick inspection period and no request for repairs can often overcome a higher priced offer, especially if a seller is motivated to sell quickly. Of course, you’ll want to make sure the necessary repairs are carefully factored into your budget.
Escalation clauses can also be an ace in your pocket to help you win a bid. This clause allows you, the buyer, to pay a certain amount of money above the highest offer the seller receives, and often comes with a cap to protect you from entering a deal you can’t afford. We help to make sure the clause is well written to protect you.
Some buyers can also sweeten their bid by offering “rentbacks” to sellers,
With a rentback, the property closes and the buyers (now owners) are getting paid rent from the sellers (now tenants) This may help both parties if the sellers need more time to move out (or purchase a new home) and if the buyers need more time to line up their lease end date with their move in date. And there are ways to sweeten this deal so that the Seller’s are more willing to accept it if this is important to them.
3. Prices will hit a new high
An interesting juxtaposition is at play in the 2021 housing market: Home prices are rising, which means you need to fork over a bigger down payment, but interest rates are low, which translates to lower monthly mortgage payments. Realtor.com is predicting home prices in 2021 will be 5.7 percent above 2020 levels. As we enter the new year, interest rates are hovering near record lows, remaining right around 3 percent for 30-year fixed mortgages.
Even though you’re paying a premium now, the record-low interest rates translate into paying less for the home over the life of the loan
There are a few strategies for buyers navigating this type of market.
If you’re willing to wait until later in the year to buy, you may see inventory ease, we don’t have a crystal ball but the tradeoff, though, is we may see slightly higher mortgage interest rates. Realtor.com predicts rates will rise to 3.4 percent by the end of 2021.
Do not look just to rising or falling mortgage rates as the only indicator if you are ready to buy. A home is not an investment where buyers should expect a quick or substantial return. Instead, a home should be considered an important path to the creation of long-term wealth.
Still, needing help coming up with a down payment shouldn’t stop you from homeownership goals.
If there were ever a time when a financial gift could come in handy, 2021 just may be the year. Twelve percent of all homebuyers and 28 percent of buyers under the age 28 rely on a financial gift from friends or family to help them with their downpayment
Generational wealth comes into play to allow a financial gift from families, which simply may not be realistic for many aspiring homebuyers.
Explore first-time buyer grants. For example, Bank of America’s Down Payment Grant program gives eligible homebuyers 3 percent of the home purchase price up to $10,000 (whichever is less) in grant funds to be applied to a down payment, no repayment necessary, Barkley says. You can also see what grants you might qualify for by checking with your lender or if you qualify for USDA Loan or a FHA Edge which allow you to get into a home with little or no down payment.
4. The suburbs will still be hot
With the coronavirus pandemic causing people to spend much more time at home, ample square footage is high on the priority list of many buyers, prompting a suburban migration.
If you’re new to suburban living, you may have some extra living costs to factor into your budget, like HOA dues and assessments, landscaping fees, and higher utility bills to heat and cool a bigger home. Services and amenities that urban buyers take for granted are not automatic in smaller towns. For instance, in most of our rural areas natural gas in not available and water is private, and so are the sewer systems this may add more to your cost of living.
5. Bigger homes, homes offices, and more bedrooms will top buyer wish lists
Not only has the pandemic, and the accompanying surge in working from home, shifted where buyers want to live, but it’s also caused them to reprioritize what features they value in their residences.
Home offices, larger square footage, outdoor recreational spaces such as hot tubs and decks, and upgraded kitchens are among the top home feature preferences. Showings for four-bedroom homes have skyrocketed compared to other categories, Zillow is pinpointing a trend where “homecation” amenities will be highly sought after.
Housing inventory is already squeezed—and droves of buyers are prioritizing all these same features.. You might also consider opting for a new or custom build, or a renovation, to help you incorporate the features you want most in a home—you might run into a few hiccups.
Yes…The supply chains are struggling, and the cost of building materials is on the rise, so if you’re planning on a major renovation or building, bring in a contractor early so that you can be confident of costs and timelines – we work with several Central OR Builders and we are happy to help.
6. Intergenerational living will start shaping the way we build homes
College dorms shut down and visitation to senior living communities was restricted amid the pandemic. Now, the real estate experts are taking note of an emerging trend: intergenerational living is on the rise as young adults and grandparents alike move in with family for health and financial reasons.
According to a recent report from the National Association of Realtors, 12 percent of homebuyers purchased a multigenerational home. This trend is playing out in how people are designing new-construction homes, with more requests for finished basements with a full bathroom, as well as bedroom additions more En-Suite Bedrooms..
We are seeing more people looking for homes where they can house additional family members. Homebuyers are looking for that garage that has been converted to an in-law suite, or a bonus room they can turn into an extra bedroom. We’re also finding family members are pulling together to buy homes because they simply cannot afford it on their own.
Again, since it’s a competitive market right now and we are all finding ourselves charting new territory with these emerging trends. You might need to get creative since inventory is tight. Whatever that creativity means for you personally we are happy to help answer your real estate questions and give you some direction that my work best for your unique circumstances. Please don’t hesitate to get a hold of us!
Carla 541-408-6333 | Marnae 541-815-1075 | Cathryn 541-588-0863