This past year has been financially devastating for many Americans. But despite everything that happened this year, the real estate market not only survived but thrived, playing a big part in our economic recovery along the way. Let’s review:
Rising Home Values
Homeowners seen dramatic gain in home equity over the last twelve months. In fact U.S. homeowners with mortgages have seen their collective equity increase by a total of $1 TRILLION since the third quarter of 2019! That equates to a national average gain in equity of $17,000 over the last year. 10% more than last year.
This build-up in equity gives more options to homeowners who have been financially impacted by the pandemic. Today, homeowners with substantial equity are in a much better position to work out a deal with their lender if they cannot pay their mortgage. Alternatively, they also have the power to sell and walk away with their equity in the form of cash or as a down payment toward a more affordable house, or a home that better accommodates the new remote learning/working world we have been thrusted into.
Falling Interest Rates
Over the past year, mortgage rates have fallen more than a full percentage point, hitting a new historic low 15 times. This is a great driver for homeownership, as today’s low rates provide consumers with some significant benefits. Here’s a look at three of them.
1. Move-up or Downsize: One option is to consider moving into a new home, putting the equity you’ve likely gained in your current house toward a down payment on a new one that better meets your needs – something that’s truly a perfect fit, especially if your lifestyle has changed this year.
2. Become a First-Time Homebuyer: There are many financial and non-financial benefits to owning a home, and the most important thing is to first decide when the time is right for you. You have to determine that on your own, but know that now is a great time to buy if you’re considering it. Just take a look at the cost of renting vs. buying.
3. Refinance: If you already own a home, you may decide you’re going to refinance. It’s one way to lock in a lower monthly payment and save more over time. However, it also means paying upfront closing costs, too.
The chart below shows how much you would save per month based on today’s rates compared to what you would have paid if you purchased a home exactly one year ago, depending on how much you finance:
What will 2021 be like for the market?
2021 looks very promising for anyone looking to enter the real estate market, with interest rates expected to remain low, home values continuing to rise, buyer traffic staying high and inventory levels predicted to rise.
As always, if you have any questions or would like to discuss your options, simply contact me directly. I am happy to assist you anyway I can!