9 Predictions for the Real Estate Market in 2021

In this post, I’m going to lay out my nine predictions for the real estate market in 2021. I’m also going to get into why the market’s so hot in the middle of a global pandemic. 

1. It will continue to be very hard for buyers to buy houses and very easy for sellers to sell their house.

It’s been that way this whole past year and my bet is that it’s going to stay that way. Right now, in Phoenix for example, there are 5,422 active properties on the MLS. It’s crazy to think that out of the six million or so people in Phoenix only around 0.09% of them are selling their home. It’s even crazier if you’re a realtor. With 43,000 realtors in Phoenix, there’s one house for every eight realtors. 

2. Your home next year is going to be 17% more valuable than it is today.

And that’s a bet. If you send me a message, I’ll take that bet. And if I’m wrong, I’ll buy you a burrito. Seriously. The market in Phoenix has had 12.77% appreciation over the last year and San Diego has seen 11.6% appreciation. This is big, so, I’m making my 17% bet for both Phoenix and San Diego. 

You can get a sense of market growth by looking at the Cromford Market Index, which measures how hot the market is. Right now, the market is so hot they had to change the scale on the index.  This is all good news if you’re a homeowner, but not so much if you’re wanting to buy a house in a year or so, because for the same house you’d be paying about 17% more. So, if you’re thinking about buying, I’d do that soon.

3. Rents are going to go up a lot.

Last year they went up 17%, and I think we can expect a similar increase in 2021. Right now, it seems like everybody wants to live in Phoenix. I get five or six calls a week from folks looking to move here. Because of all this demand, we’ve been seeing massive amounts of appreciation. I don’t think that’s not going to stop this year. 

4. Interest rates are still going to be awesome!

Interest rates are probably going to be around 1.9 or so it seems. Right now, we’re in the high two’s and low three’s, depending on your credit and such. I don’t expect this to go away, and I expect we’re going to see great rates continue. 

5. Near the end of the year, things are going to slow down.

I think we’re going to start to see the market start to slow down near the end of this year. Why? Well, that’s number six.

6. Interest rates aren’t going to get any higher. 

Things are going to slow down because, eventually, interest rates aren’t going to get any higher while the cost of homes will continue to go up. We’re going to see 15% or 20% appreciation while people’s wages, on average, are only going up about 6%. When your wage growth is getting doubled or tripled by your home appreciation, that’s a recipe for people not being able to afford houses. When that happens you’re going to see people drop out of the game and that will cause demand to go down, which will cause the pressure on prices to decrease a little bit. I also think there’ll be a lot of investors who will start to cash out. 

7. There is not a bubble.

I’ve done a video and posts on why there’s not a bubble and why there are not foreclosures coming, but I still get about a calls from people going, “you know, I’m going to wait until prices go down.” I think that’s a mistake. They’re not going to go down. This is a different situation than we experienced in 2005, 2006, and 2007. Don’t wait around. If you do, you might miss the boat. 

8. If you’re looking to buy a house, I would buy it.

Right now is a great time to buy. I think prices are going to keep going up, so it’s better to get in now. Plus, it’ll likely be worth 17% more next year. If you own a house, though, I wouldn’t sell. I’d sit on that and enjoy the ride as prices rise.

9. Why all this is happening.

There are several parts to this answer. The first part of this is that builders have been sitting on the sidelines since they got it handed to them in 2008. Many builders went bankrupt and stopped building houses. Because of this, right now, we have an undersupply of properties. A lot of people have been living with roommates, but as COVID hit people realized they didn’t have to, and with interest rates down the masses started coming into the market to buy properties. Low interest rates are a real driver of demand right now. 

Secondly, because of the coronavirus, people aren’t buying services as much. They’re not flying, going on vacations, getting massages, going restaurants, or whatever. They’re taking all that money and either saving it or spending it on stuff. One of those things is houses, and the prices reflect that. 

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So, those are my nine predictions. Don’t forget to send me a message if you want to enter the burrito bet. And if you’re looking to buy a home or sell your home, let us know and send us a message. We’d be happy to help you out in the San Diego or Phoenix areas. And if you’re a real estate agent looking to get on a great team, drop us a line. We’d love to chat with you all either way.