Reading the Numbers – Anticipating Where Real Estate is Headed in 2021

“There’s no management without measurement.” This axiom applies to more than just business. Real estate professionals as well as rank-and-file buyers and sellers rely on past metrics to determine future actions. 2021 has most certainly presented unprecedented challenges as well as opportunities as the data reflects. So it has us anticipating where real estate is headed in 2021.

The California Association of Realtors issues a monthly recap of market activity that shows continued growth. Highlights from CAR’s January 2021 reports show:

  • 12 days is the average Days on Market (DOM) for California new listings as of January 31st compared to 31 days for the same reporting period in 2020. Sales are currently closing at a rate over 2 ½ times faster than last year. Additionally, California’s DOM is 85% faster than the nationwide average of 21 days.
  • Sales activity hit its highest level since 2009 resulting from 484,730 existing California home sales during the month of January. 
  • $699,890 represented the median home sales price in California as of January 31st, up 21.7% year-over-year.

Measurement Rates of Activity

Great news for January! Unfortunately, CAR and other sources’ data do not reflect real-time activity and usually trail current activity 30 – 60 days. Mortgage interest rates, on the other hand, can be measured daily. Record-low mortgage rates sparked tremendous sales activity in 2020, but February brought the first significant, incremental rise in interest rates since the beginning of the Pandemic. 30-year fixed-rate conforming loans rates approached 3%, causing real estate agents and consumers concern that activity could significantly slow down. With the introduction of rising rates into the mix, which direction will the market take for the next few months?

While we have no crystal ball to predict the future, we can still look both backward and forward to find reassurance that we’ll see continued growth in the months to come. 

Where Real Estate May Be Headed in 2021

  • Yes. Interest rates are rising. However, rates remain historically low compared to 2020; in February 2020, typical 30-year fixed rates reached reach 3.3% and higher. This could mean the difference of hundreds of dollars to a buyer’s mortgage payment compared to today’s rates.
  • Activity for February and March remains strong, indicating that buyers still find reasons to participate in the market.
  • Optimism resulting from initial success in battling COVID-19 in 2021 translates into overall confidence about the economy and jobs, which will result in a rise in consumer confidence with first-time homebuyers and existing owners looking to upsize or downsize.
  • Stimulus relief programs currently in progress will contribute to improving consumer confidence which will have a positive impact on the economy. 

C21 Peak’s Comprehensive Approach

The most effective way of developing an action plan remains analysis of past performance, especially in real estate. But while the numbers may yield significant insight into the future, never discount the impact of current conditions. Today home buyers and sellers have more reasons than ever to jump into the market, and real estate professionals should continue to find more ways to satisfy the demands of a hungry market. CENTURY 21 Peak is monitoring both real estate and financial markets for information to make the best recommendations to buyers and sellers.