A bright spot in an otherwise dreary 2020 was the residential real estate market. After briefly retrenching at the beginning of the pandemic, home sales soared. A lack of homes on the market and low mortgage rates caused prices to skyrocket. Rising prices lifted home values, creating more wealth for homeowners.
But not everything was rosy. As of this month, 5.2 percent of mortgages, or 2.7 million, are in forbearance, according to Black Knight, a mortgage data and technology company. That represents $547 billion in unpaid principal.
Many experts are predicting another strong housing market in 2021. They are forecasting increased demand from buyers who delayed purchasing homes because of the pandemic; from existing homeowners who need larger spaces to accommodate parents working from home and children attending school virtually; and from condo owners who are seeking to escape multifamily buildings for single-family houses to mitigate exposure to the virus. The ability to tour homes and close on purchases virtually will make buying a home simpler in 2021.
Young adults fueled the increase in home sales in 2020, with millennials making up the largest share of home buyers at 38 percent. Higher earners — often less affected by the pandemic’s financial repercussions — also accounted for higher home sales in 2020.
But first-time buyers are likely to face head winds in 2021. Buyers need more money than ever before to buy a home. According to the National Association of Realtors, the median household income of first-time buyers in 2020 was $80,000, up from $68,703 in 2019. The median household income of repeat buyers was $106,700.
Affordability worsened in much of the United States in the fourth quarter of last year as median home prices were up at least 10 percent in most of the nation, according to a report by Attom Data Solutions. The report found that 275 of 499, or 55 percent, of the counties it analyzed were less affordable in the fourth quarter of 2020 than past averages. That’s up from 217 in the fourth quarter of 2019 and 164 in the fourth quarter of 2017.
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