Interest Rates Will Level Off, Prices Will Continue to Rise
Another factor that will slow the 2021 market, if only slightly, will be rising interest rates. As we noted, one of the main factors fueling 2020's hot demand was historically low-interest rates.
Mortgages for a 30-year fixed-rate loan could be had for as low as 2.5% in December 2020, which hasn’t been seen since rate tracking began in the 1970s. While we may not see rates dip to that level, expect them to hover in the 3% to 3.5% range for much of the year.
Although the offset to continuing rising home prices will be less than it was in 2020, the sub 3.5% rate will keep home buying attractive. Compared to last year, prices should only see a modest increase of 5% on average for much of the Main Line market area.
With current mortgage rates at 3.250% for a 30-year fixed loan, a new home purchase can be a relatively affordable endeavor. However, that doesn't mean less competition.
2021 will remain a seller's market, but buyers will have more room to maneuver. However, when a great home in a great neighborhood hits the market, expect multiple competing bids.
So if you're in the market for a new home, who and what will you be competing against?
While 2020 felt like a mad dash to make the most out of the evolving pandemic, certain trends that materialized are carrying over into 2021—primarily working from home.
Many companies that loosened the reins on working from home are continuing the experiment into 2021. This translates into greater demand for homes with many extras—dens or home offices, extra bedrooms or living areas, additional storage or flex areas, and plenty of outdoor space.
Expect listings meeting the above criteria and the communities that have them to garner the most attention from buyers.
As far as who those buyers are, millennials and Generation Z will significantly impact new home purchases over the next five years. Starting in 2021, aging millennials will upgrade their housing —larger homes further from urban cores. Generation Z will be aiming for their first home and looking into up-and-coming neighborhoods.
New development and historic homes with plenty of charm will be attractive to both groups.
Active buyers will also encounter investors flush with cash. In certain circumstances, it may prove challenging to compete with all-cash offers.
Navigating the Market
If you're in a position to do so, coming to the table with a cash offer is the ideal way to grab your perfect home. However, don't forego any details of the purchase (such as contingencies or an inspection) that make you uncomfortable and you might later regret.
To land your ideal home, the 2021 market will allow buyers to be more patient. If you plan to purchase through a loan, ensure you're pre-approved and ready to move when the time is right. Rates remain attractive, and there are plenty of Main Line communities that make for an excellent long-term commitment.
Ready to explore the best of Main Line Philadelphia real estate? Contact Main Line Fine Homes today
to start your home buying journey. From Lower Merion Township real estate to Villanova homes for sale, allow our team's years of experience and expertise to be your guide to the Main Line luxury real estate market.