Big changes are in store for the mortgage industry in 2021. While real estate is projected to experience a massive boom this spring, what else can we expect from the year when it comes to mortgage rates, home prices, and more? Keep reading to explore various 2021 mortgage trends so you can be prepared for what lies ahead.
Home Prices Will Continue to Rise
Home prices rose considerably in 2020. While the market doesn’t expect such a sharp rise for 2021, the rise is expected to continue for the year – only at a slower pace.
This is perhaps the most important of the 2021 housing trends for people looking to sell their homes in the coming year. However, it is also of importance to those who want to purchase homes. It means, the earlier in the year you buy, the better it will be for you when it comes to getting better prices and building faster equity in your home.
More Americans will Relocate to Suburbs
Between COVID-19 and other concerns, people are fleeing large cities and heading out to the ‘burbs in bigger numbers. It’s not just large cities that are feeling the pinch of a mass exodus. Even some states, like California, where the costs of living are skyrocketing are seeing more homes stay on the market longer as people are exiting the areas for greener, cheaper pastures.
The pandemic has only accelerated the trend, which began much earlier as people are becoming claustrophobic in homes that feel too small with everyone trapped inside for the better part of the last year. The larger homes and open spaces of the suburbs have suddenly become far more appealing than the bright lights and nightlife of the big cities – especially now that many of the entertainment and events that made these cities so attractive are closed for the foreseeable future.
VA Loans Are On Fire
Another of the 2021 housing trends that is a continuation of 20202 trends is the proliferation of VA loans for military and veteran home buyers. Young military service members are accounting for many of these new VA loans as they offer more forgiving credit requirements than conventional loans and the benefit of not requiring down payments to buy.
This means that Millennials and Gen Z or Zoomers who serve in the military are ahead of many of their counterparts when it comes to purchasing homes.
We Will Continue to See Low Mortgage Rates
While early 2021 mortgage rates are at historic lows, there is no sign in sight of major upheaval to the current status quos. Ultimately, we expect the standard mortgage rate to remain quite low for the time being.
No one wants to risk another recession by raising mortgage rates prematurely and the housing markets are remaining healthy, even growing, at the current interest rates. Between pandemic and economic concerns, it looks as though no one really wants to rock the boat.
Mortgage Rates Could Inch Slightly Higher
While we do expect 2021 mortgage rates to remain low, that doesn’t mean we won’t see a rise in rates at all. In fact, they are expected to increase but only slightly. The current average mortgage rate is three percent, the predictions are an increase to 3.1 percent over the course of 2021. What this means is that if you’re thinking about buying or refinancing a mortgage for lower rates, now is the time.
The Bottom Line
While the first quarter of 2021 is expected to look much the same as 2020, we expect to see a few shifts in 2021 housing trends and 2021 mortgage rates. We’ve highlighted many of the expected trends for the year, like rising home prices, relocations to the burbs, VA loan proliferations, and continuing low mortgage interest rates.