As president of Edina Realty, Sharry Schmid provides guidance and direction to nearly 2,500 REALTORS®.
2020 was, of course, a year that no one could have predicted. But while COVID-19 has impacted most industry sectors, the housing market has remained an economic bright spot. Outside of the spring months, when stay-at-home orders led to a significant drop in listings and sales, the market rebounded and remained steady throughout the summer and fall.
As we move into 2021, many are wondering if the real estate market can continue to flourish, and what else we can expect from our local economy. Though this year was a stark reminder that no one has a magic crystal ball to predict the future, we are able to make a few reasonable projections as to what the next year will hold for housing in Minnesota and western Wisconsin.
What else lies ahead in 2021
- Inventory: Unless a larger-than-expected number of homeowners default on their mortgage payments and enter foreclosure, we do not anticipate a surge in inventory in 2021. This means that housing inventory, especially in the lower price points, will remain scarce — giving sellers a continued advantage in the market. As they have in the last several years, buyers will compete over fast-selling listings.
- Home prices: We anticipate that prices will keep rising moderately in 2021, which means that median home prices in our 13-county metro will remain above $300,000 this coming year.
- Interest rates: While some economists believe rates could fall to an all-time low of 2.5%, most agree that a slowly improving economy will keep rates between 3-3.5%. In either scenario, the low rates will help to offset rising home prices for buyers.
- New construction: Perhaps surprisingly, builder confidence is at an all-time high. Due to home price appreciation, the gap between existing home prices and the cost of new construction is narrowing. Economists project that the usual 15-20% variance is down to just 5% in our market1. Builders see a unique opportunity to capitalize on this trend, especially as many would-be buyers grow frustrated with a lack of available or affordable inventory meeting their criteria.
Looking ahead to a brighter 2021
In many ways, 2020 has been a test of strength. We have witnessed immense fortitude from our healthcare and essential workers, resilience from parents, kids and teachers, and ingenuity from businesses, organizations and families.
While this holiday season may not roll out the way you’d pictured it, I remain optimistic that the coming year will be much brighter than the one we are leaving behind. Today and always, I wish you and your family the very best of health, security and happiness.