Is 2021 a Good Year for Real Estate Investment?

Historically, mortgage rates go down during a recession and housing prices usually follow. Therefore, one might think that 2021 is a year of great opportunity for buying real estate. Whether you want to become a homeowner or invest in a property to rent out in the future, you’ll need to remember that the current recession is not like the others.

The situation on the housing market during the Global Financial Crisis of 2008 is very different from the coronavirus crisis. Therefore, you need to consider forecasts and your current finances very carefully before making a decision.

Housing Prices and Availability in 2021: What to Expect?

Traditionally, a recession has a rather adverse effect on the housing market. It causes prices and sales to drop significantly. Foreclosures and other factors increase the supply of housing on the market. This means that, in general, a recession is a good time to buy good homes for cheap. However, as their value won’t be rising for a while, this is always a long-term investment.

This is how the situation usually develops, but the coronavirus crisis of 2020 and the recession it triggered is different. The most important differences are:

  • Housing prices haven’t dropped significantly. In fact, in some regions they have increased. And they keep growing despite the worsening of the economic situation.
  • New listings have decreased by 47% by the middle of April. This means that the supply of housing on the market has gone down drastically causing a great shortage of options. This alone prevents prices from going down. With such a short supply, sellers are the one dictating prices and they have no reason to be flexible.
  • Affordable housing is in very short supply and this situation won’t be changing because the building rates are also down.
  • Buyers are in short supply as well because unemployment rates are growing. Therefore, people simply have no funds or are too uncertain to take on a mortgage.
  • Loan origination is dropping fast. It’s true that mortgage rates are low. However, lenders safeguard themselves by making loan eligibility terms more stringent. Many lenders have ceased loan origination completely. Therefore, one is outright unable to get a mortgage.

That said, there is no arguing the fact that the market does offer some very promising opportunities right now. The question is whether you have the capital and financial security to use them.

Mortgage Rate Forecasts for 2021

Buying real estate during an economic recession is usually a smart move. This is because mortgage interest rates go down during this time. The COVID-19 crisis of 2020 might be unique in many ways. However, it had a conventional impact on bank interest rates. In fact, they are currently near an all-time low, under 3%.

Moreover, experts seem to agree that despite a slight increase in mortgage rates recently, they will continue to remain low. Therefore, if you manage to get a mortgage and lock in the rate soon, you can get a fantastic deal.

You shouldn’t get concerned if you notice an upward movement of the interest rates while looking for a property. But you shouldn’t wait too long as well. The rates will continue to increase gradually and housing prices won’t stop climbing either. The number of available properties is also a concern, so one needs to act fast.

Also, keep in mind that the situation might change quite a bit if the second half of 2021 shows good economic recovery. Therefore, your window of opportunity might close.

Bottom Line: Should You Buy Real Estate in 2021?

While it’s true that debt can be a “good” in some circumstances, you need to understand that it can become overwhelming fast. Therefore, the main thing you need to consider is whether you have the opportunity to pay off a mortgage. It’s true that interest rates are low and should continue to remain this way for a while. However, it’s also true that the level of unemployment is skyrocketing.

This means that if you can afford to buy a piece of real estate, now is a good time to do it. But do this only if you are sure about your job security. Otherwise, you are risking to take on a huge debt that might break you financially.

That said, this year is indeed very promising for making a real estate investment. An opportunity like this doesn’t come often. Therefore, if you are able, now is the time to use your chance.

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