Don’t you wish you had a crystal ball with perfect vision to peer into the future of real estate? Last year at the same time the word “COVID-19” did not even exist in our vocabulary. The future always has been – and always will be – a bit fuzzy. Between the presidential election this year and COVID-19 sweeping the globe, 2020 has inserted a great deal of uncertainty into people’s lives. Nevertheless, regardless of what happens in the world beyond our personal control, people will always need a place to live, and our population and household creation levels continue to increase. Since the recession ended, there have not been enough new homes built nationally to keep up with demand. Consequently, even though real estate took a pause in the spring during coronavirus stay-at-home restrictions, it has continued to be a bright spot in the nation’s economy.
Colorado is a very attractive place to buy real estate, but even more so, Boulder County. Over the last 42 years that I have been a Realtor® here, we have seen strong real estate appreciation and stability. We have weathered recessions, 16% interest rates, and yes, even COVID-19. That’s why Boulder has been ranked in the top three housing markets in the nation for home price growth and stability by SmartAsset six years in a row.
On Dec. 8, I had the privilege of watching a presentation by the Chief Economist of the National Association of Realtors®, Dr. Lawrence Yun, and the leader of the world’s largest real estate coaching company, Brian Buffini. These two highly respected speakers in the real estate industry have a wealth of knowledge and research at their fingertips, making their predictions a little clearer than mine – or many others. Here’s what they each of them had to say.
Dr. Lawrence Yun opened with his presentation by reporting that COVID-19 has not affected real estate the same way as the recession of 2007. “At the start of the 2007 recession, we had subprime loans out there and a 10-month supply of homes. Coming into 2020, there had been eight years of stronger loan underwriting, a two-month supply of homes, and historically low interest rates. Even though we missed the spring real estate selling season, home sales shot up 20% in the latter part of 2020 compared to the same time frame in 2019.”
He continued, “On an annualized basis, even with the spring pause, home sales were up about 5% over 2019. It will be interesting to see what the data looks like once all the 4th quarter statistics are in.”
Yun made it clear that home sales would be even higher if we had more homes to sell. In nearly every major market across the country, there is a lack of inventory of homes for sale. One of the trends Yun pointed out was relocation activity and housing preferences, which have arisen from remote work. “This has caused a considerable amount of real estate activity. Many have left the cities for the suburbs since they can work from home or only go to the office a couple days a week. This makes longer commutes more acceptable if someone only has to do it a couple times a week. Another trend is back to bigger houses, maybe with one or two office spaces, more and larger play areas and living spaces to make it easier to deal with stay-at-home orders.”
Yun’s crystal ball predicts, “Home sales will rise 5 to 10% in 2021. Employment will come back as the vaccines are deployed. Low interest rates will continue throughout the year. The work-from-home flexibility will cause flight to the suburbs. Prices should continue to rise in the 3 to 5% range.”
Brian Buffini noted that the Chairman of the Federal Reserve has said the Fed funds rate would likely remain in the 0.25% range through 2023. This government pressure on interest rates should keep the mortgage rate similar to what it is now in 2021.
Buffini outlines three trends that echo what Yun mentions. The first is what he calls “decentralization,” or the move to the suburbs. Buffini says, “Residential tenants’ movements to the suburbs is a leading indicator that homeowners will be making that move in larger numbers. It is easier for tenants to quickly pull up stake and move, and that is happening.”
Second, relocation is quickly transforming. With the flexibility to work from any location, homebuyers are fleeing to suburban towns and vacation hotspots. “Areas known mainly for vacation homes have seen sales rise dramatically as people can work from their favorite vacation spot.” He says that “another trend is that buyers are moving to areas with lower taxes, lower government regulation and warmer climates.“
Third, he observes, “Buyers are upsizing. Prior to COVID-19, big homes were falling out of favor. Now, with COVID-19, the demand for office space, larger living areas and even classroom space for kids is high. Plus, 52% of millennials are still living at home, requiring more independent space. “
There you have it. Two of the most renowned real estate experts in the county have similar insights and reflections. Next year at this time, we will see how true their forecasting has been. In summary, what this all means is that housing inventories are likely to remain low, keeping home prices stable and slightly rising.
Remember, all real estate is local. What happens on a national level may not affect your street in your neighborhood. To learn more, contact your local Realtor who is your best consultant with regard to predicting what will happen for your real estate situation in 2021.
By Duane Duggan. Duane has been a Realtor for RE/MAX of Boulder in Colorado since 1982 and has facilitated over 2,500 transactions over his career, the vast majority from repeat and referred clients. He has been awarded two of the highest honors bestowed by RE/MAX International: The Lifetime Achievement Award and the Circle of Legends Award. Living the life of a Realtor and being immersed in real estate led to the inception of his book, Realtor for Life. For questions, e-mail DuaneDuggan@boulderco.com, call 303.441.5611 or visit boulderco.com.