While many investors ran for the hills and began hedging against the effects that the COVID-19 pandemic brought earlier this year, the housing and mortgage markets for 2020 ended up sizzling!
Entering the last month of the 2020 calendar year closed home sales were projected to exceed 2019 sales by about 1.0%. This was a nice normalization considering present economic volatility.
If you are an investor that struck while the iron was hot this year, you should reap a nice return on your investment. According to Realtor.com, home sales for 2021 are forecasted to exceed 2020 numbers by 7.0%.
While affordability continues to be a growing concern, so long as demand for homeownership remains high coupled and the mortgage interest rate environment remains low, the housing market should show no signs of stalling.
The National Association of Realtors notes that 31% of all home buyers are first-time buyers. In fact, the median age of first-time buyers is 33 years. This means millennial and Gen-Z buyers should continue to provide upward pressure to keep home prices high. Note that home prices have surged more than 10% this year compared to roughly the same period a year ago.
Additionally, the average U.S. 30-year fixed rate mortgage hit 2.71% earlier this month, another record low compared to the last set in mid-November. This is the 14th drop this year that has resulted in a new record low.
The best part is there is no sign that the trajectory of interest rates will be increasing any time soon. The Federal Reserve has specified that it will keep the benchmark interest rate at or near zero for the foreseeable future. Some economists predict that rates could remain low through the year 2024. CoreLogic recently released projections that rates will most likely remain low into 2023.
This is a great excuse for you as a real estate investor to go on a buying spree, expand your portfolio, and lock in cheap money before rates start to increase. With home values appreciating rapidly, those with good credit and reserves may also see an opportunity to tap into new equity and further leverage your existing portfolio.