The past 12 months have been anything but stable. With twenty-somethings moving back in with their parents, post-graduates holding off on buying homes, and a lack of consistent income for many, the pandemic has made huge waves in the housing market. If you’re looking to rent or buy a property within the next year, you might be wondering what all of this uncertainty actually means. To make sense of the chaos, we’ve enlisted the help of New Jersey real estate agent, Harveer Singh, to guide us through five facts about the housing market in 2021.
1. A lack of inventory means higher home prices
For a variety of reasons, the housing market is lacking available properties in 2021. With historically low interest rates and a whole generation of millennials looking to buy, an abundance of people are ready to purchase homes. However, older generations are staying put and new properties are slow to hit the market, creating a gap between buyers and sellers.
So what’s the correlation between low inventory and current housing prices? Singh explains, “If you think in terms of economics, when there is low supply and high demand, prices go up. Right now, there’s a lot of demand. In the real estate market, that translates to a lot of buyers. So that ends up driving up the price.”
2. Interest rates have increased but are still very low
When purchasing a home, interest rates can be a make or break issue. Low interest rates typically indicate a good time to buy and give more purchasing power to the homeowner. But why are they so low right now, and will they stay that way?
Due to the pandemic, many large banks as well as the federal government have put measures in place to support an economic rebound, including committing to low interest rates for the next few years. Despite this, interest rates have slightly increased in 2021. Singh chalks this up to fluctuations in the stock and bond markets and expects rates to increase slightly while remaining relatively low.
3. The summer market will be hot
Between the bright green lawns and natural sunlight, it’s no surprise that many homeowners wait to buy until summer. Singh explains, “Summer markets are always ‘hot.’ There’s a lot more activity between buyers and sellers that time of year.”
Changing seasons could spur change in the housing market, but will interest rates interfere with this normally lucrative season? If you’re wondering what experts think, Singh tells us there’s nothing to fear, and that he doesn’t anticipate low interest rates having a significant impact on the summer market.
4. Sales in the suburbs are on the rise
For so long, cramped apartments and jostling shoulders on the sidewalk have been considered part of the charm of city living. But as the pandemic hit, many urban residents quickly realized the potential risks involved with being packed into city centers so tightly. Singh emphasizes the buyer’s newfound need for more space, especially in outdoor areas for hosting socially-distanced visits. With city-dwellers fleeing to areas with larger lot sizes and a greater distance between neighbors, suburban properties are hot.
5. Continued uncertainty in the rental market
If you’ve ever rented before, you know it’s not as simple as finding the right space. Renters have to navigate their way through security deposits and credit checks just to get a call back from landlords. Now these screening methods are having widespread impacts on the rental market. “Right now, rentals are sitting on the market for months,” Singh tells us. “A lot of people across all industries lost their jobs due to COVID, and that also affects the real estate market heavily. Now if someone needs to get a new rental, maybe their income isn’t there or they’ve got debt and their credit is low. There are so many available units because people are willing to move, but the landlords need to feel comfortable that someone’s going to be able to pay the rent.”
These stipulations around renting put those with inconsistent or nontraditional financials into a tough spot, but Singh believes that if you have a steady cash flow and good credit score, you can find a quality rental almost anywhere right now.
Drop a comment below to give us your perspective on the New Jersey housing market in 2021. Visit www.RealEstateSingh.
Main image by Roger Starnes