Get ready for a wild year of Real Estate in 2021! If you thought 2020 was full of surprises, just wait. Between sellers having the upper hand and mortgage rates reaching an all-time record low since 1971, we’re in for quite a year as we look forward to the housing market in 2021.
It’s no shock that lower rates are more favorable, especially for homeowners who have struggled to make their monthly mortgage payments. Affordability is finally within reach! But what does this mean for homeowners in the future? Will there be a jump in rates yet again? Will they remain low? What do these record low rates mean for current and new homeowners in 2021?
If there is anything worth keeping from 2020, it’s definitely these record low rates. Unfortunately, they may not stick around without stirring a little trouble in the market.
Revisiting Important Housing Factors and Trends for 2021
Record Low-Interest Rates
In a previous blog, we highlighted a few emerging trends to be on the lookout for in 2021, low-interest rates being one of them and it’s worth a revisit. To put in perspective just how low these interest rates are, take a look at these statistics comparing previous years’ data. According to Freddie Mac’s Primary Mortgage Market Survey,
30 Year Mortgages
The average rate for the benchmark 30-year fixed dropped 2 basis points to 2.65%, In January of last year, the 30-year fixed was 3.64%.
15-year Fixed-rate Mortgages
The average interest rate on the 15-year fixed mortgage slipped 1 basis point to 2.16%. At this time last year, the 15-year fixed-rate mortgage was at 3.07%.
So, we know that we are experiencing record lows compared to previous years, but what does this mean for current or prospective homeowners? One word: Opportunity. Now is a great time for many homeowners and prospects who want to save money on their home loan or refinance their existing mortgage.
But, It’s a Sellers Market
While there may be opportunities out there for homeowners who are already in a home, issues arise for those who are in the market for a new home. In a previous blog we stated that due to an influx of buyers and a shortage of homes for sale, sellers have the upper hand with home prices and the advantage of selling their homes relatively quickly.
If interest rates stay low, buyers will be more motivated to buy sooner rather than later but they are at the mercy of the seller’s price. While the low rates have brought home buyers into the market, high demand and low inventory has caused an increase in home prices. The issue now is the result of the combination of record-low rates with record-high home prices. According to the Chief Economist at Freddie Mac,
“The combination of rising mortgage rates and increasing home prices will accelerate the decline in affordability and further squeeze potential home buyers during the spring home sales season.”
This indicates that although we may be off to a great start with record-low rates thus far in 2021, there will be consequences that prospective buyers might encounter in the coming months as sellers stand firm in their above-average selling price.
Take Advantage of Low Rates Right Now
What is the best course of action to take right now? If you are thinking of buying, do it while rates are still low. It may be a seller’s market, but buyers have the opportunity to take advantage of low rates to offset the steep rises in home prices. If you are a current homeowner, you can consider refinancing to save money on a current home loan or mortgage. Before deciding to refinance, consider how many years remain on the loan you have and how much longer you plan to stay in your current home. Then take a look at the costs of obtaining a new loan compared to the amount of interest it will save you. If the payoff isn’t there, it might not be wise to refinance right now.
Whether you’re buying, selling, or just want to talk about what record-low mortgage rates mean for you, don’t hesitate to reach out to your team at Moayyer Real Estate group. Partner with your trusted professional real estate agents in Grand Rapids.
Campisi, N. (2021, January 07). Today’s Mortgage Interest Rates: Jan. 7, 2021-New Year, New Record Low Rates. https://www.forbes.com/advisor/mortgages/mortgage-interest-rates-01-07-2021/