What's the Market Going to Look Like in 2021?

Question

Hello BP!!

I'm a newer agent, and a lot of my clients are curious to see what the market will look like throughout the year. I give them my insight, but would like to know how other people are answering any of these questions:

Will the market have a correction this year? Do you expect a large increase of foreclosures?

Do you expect home values to continue to rise? Should I sell now while things are hot, or wait?

I understand that we can't predict what the market will do, but wanted to get some insight on what everyone thinks.

Thank you for your input and feedback!

LeAnn Riley · Answer

2021...  There is a market correction taking place right now. LOW LOW inventory and rising prices, like Tim Swierczek said above.  It's not going to get any better in all of 2021. The new builds can't keep up with the inventory shortage.  Thank goodness there are low mortgage rates to compensate for the higher prices.

Foreclosures...not expecting anything to happen in 2021, maybe later in 2022. It's nothing to wait for as some investors keep saying...I'll wait till the foreclosures come on. That thought pattern follows old school thinking about the last recession in real estate.  BUT this market is different. The market conditions of low inventory are shocking all the old models so don't apply old thinking.  Also, check the statistics, foreclosures are such a small part of the market. If you are waiting for something to happen in less than 5% of the market it's too small of a niche. Better to figure out what IS happening. I did some predictions, after thorough research, check my social media.

Smart investors are looking for new opportunities. I know some Realtors who are actually going into building homes. Good thought, not enough inventory....then create what the people want. Price isn't an issue.

The result of the pandemic and people moving out of the city is real, working from home changes what people want in a house and location isn't as critical. Many people will remain working from home in the future.

I just interviewed a broker/property manager today of over 500 units LIVESTREAM and we both agreed that with the low vacancy rates, eviction moratorium and changing city rules, NOW is a great time to sell and reposition the funds. There are many options, still in real estate. Remember, those who hang on to properties for long periods may lose the depreciable front end load and re-arranging portfolios can benefit the bottom line, even in this market. It ALWAYS comes back to knowing the numbers.

For new investors....I always know there is a deal out there. You just have to be very clear on what you are looking for. Buy and hold and cash flow are what survives changing times.

James Hamling · Answer

@Forrest Kalk actually everything you stated for questions is known, with absolute accuracy, not via any crystal ball or guess-work but via math and data.

Here in the Twin Cities the data is clear, there is 0 question of where things are going and will be, prices are going up in all classes short of luxury. We have massive supply shortage of units, across the board, you name it and the housing type is in shortage; apartments, townhomes, 1st time homebuyer homes, senior living, it actually takes some considerable work to find a specific niche where anything less is true.

So with that the math is simple that new unit creation is the controlling force in the market economy, when there is sky high demand without relent the cost of replenishment is what will dictate price direction. Well, we have massive skilled labor shortages, massive material shortages, tariff war with Canada, wildfires torching lumber supply reserves (aka forests), tax increases raising operational and labor even more.... There is no less than a dozen factors all pressing prices up.

The question about "market correction" is the wale-song of those who just want things to go back how they were, well the problem with that is that in 2,000 years of real estate things have never 1 time "gone back to how they were", that is reality. Real Estate prices go up and have gone up consistently and steadily for not dozens or hundreds of years but THOUSANDS. The micro dips, that is what they are, a MICRO dip. 08/09, YES it was a MICRO dip. Sure, in 2010 it felt like the sky was falling, but here we are in 21 and prices are higher than ever before, all of 08/09 is a memory and only a memory, put it on a chart-line and it becomes very clear of how real estate has a constant appreciating line with these blips of some up's and downs along that path.

Foreclosures is laughable, I have heard those same apocalyptic hopefuls talk on this too but fact is short of alien invasion there is nothing to make a 08/09 collapse repeat. AND even if we go into fantasy land and say "well what if" there is very literally enough investor capital and organizations sitting the sidelines right now awaiting opportunity that the entirety of the 08/09 foreclosure inventory would be bought no less than 2x-over. So with that demand, as quick as foreclosures come on they are not only snatched up instantly but getting bidding wars.

Fact is, the market already shifted, and is in middle of shift, this IS the new landscape taking fold at this very moment. And it makes it near impossible to do what was done yester-year and be profitable, that's how change works, you must evolve with it or assume the position of a fossil and await extinction.

As @LeAnn Riley pointed out opportunity abounds, it is simply different, and investors must adapt, adjust, change or exit, it's just that simple. In 2010 I could almost walk a street and buy any property I wanted, I actually would do that, knock door 2 door and ask. AND for REO's, all but nobody wanted them, and I could submit an offer at 50% of asking and get it, regularly. Where would I be at today if I sit around lamenting "when will things correct back to how they were"..... It's over, done, kaput, that market is yesterdays, tomorrows is one of higher costs, moratoriums, and an investor must be smarter, more savy, expend the effort to make the profits.

Canesha Edwards · Answer

@Forrest Kalk

Hey Forrest-

Like everyone says there’s no crystal ball.

If I had to make a prediction- I would say the market will run as long as the government props it up.

Always manage your downside risk.

For the sellers-  If your property has appreciated by a large amount, and you’re looking to sell, then sell. Take profit. Don’t hold out waiting for more because no one knows if the market will keep appreciating.  All these studies, reports, surveys, about to the market appreciating are just that. They’re a best guess, not fact.

For the buyers- You have to look for value in times like these. The average home price is the highest it has ever been. Real estate has always been about buying low, and selling high. You make you’re money when you buy. Determine your exit strategy and work backwards from there.

Just my 2 cents.

Best,

Canesha

Tim Swierczek · Answer

It will be on fire.  Case Schiller & Zillow are predicting appreciation in MN between 7-11.5%.  Rates should remain low.  Great time to buy and sell because affordability is high but so are housing pricess.

James Hamling · Answer

I know how incredulous the statement that 08/09 was a "micro blip", believe me I know, I was an investor in '09' and loving every minute of it as everyone kept saying I was a mad-man and gonna loose everything. Fun-fact, on '09' everyone was saying the same thing, that they were waiting for things to calm down, go "back to normal", those of us who were investing at the time know the truth that we were the 2%, books and programs now are written to make it seem as if it was the popular action, it wasn't.

Point is, seriously pull out the charts for the median home values over timeline, a reasonable time in market years say 30+ years and it will blow your mind how small those changes actually were, and how much the market keeps snapping right to the steady straight upward trend.

I remember the dot-com-crash and people were talking about the sky falling and will it mess up housing, how prices can't keep going up. And in 90's people said homes were getting over-priced "a correction is coming", and in the late 80's about how rates were too high and things needed to get back to normal. In my near 30 years in real estate the 1 thing that has never ever changed, is people saying ___ is wrong and there is a correction coming, after that they will _______. I have heard that song for decades, and it has been right 1 time, lol. I could stand outside and declare "there is gonna be tornadoes today" every day of summer, and have a higher accuracy rate, lol.

Look, the thing is the data is SUPER clear, things are harder to forecast the closer they come together, this is the easiest it's ever been, literally, to forecast. We have such a massive shortage, we are talking years on end of building non-stop AND ramping up volume every year, just to get to 0. AND we have a list of rising costs so long it's actually comical to put down and look at, the entire home building industry is in 100% agreeance that home prices will be SHARPLY increasing this year, the only question is how much and how many times, and for how many years.

Try this, go talk to a lumber broker and ask them when will prices come down, $100 says you wont even get a word until they are done laughing, it is that significant what is going on in home building.

My #1 complaint with the REI world is it's total disconnection and purposeful ignoring of the home builder world and NAHB. It makes 0 sense, they are "THE" experts of what's coming in the future, nobody knows better than those who literally are building the future of housing. The make or don't make the homes, they price the homes, they literally set and make the market. If you want to know the future of housing, it's a known fact just go to NAHB and your local builder association, they are happy to discuss and lend the insight, all you have to do is ask.

Michael Ablan · Answer

@Forrest Kalk -  We are having record #'s in the middle of winter, if that tells you anything.

Normally we're resting and recovering from a super busy summer/fall season.   This year is going to be all about kicking a$$ while avoiding burnout

Forrest Kalk · Answer

@James Hamling Thank you for sharing! This is really great. I had similar thoughts about foreclosures, but have been getting several questions about it..

I enjoyed reading about the ''micro-dip'' in 08/09 and the overall trend of the market. I have several buyer clients that want to wait for things to ''cool down'' before they buy. I've tried explaining that it won't matter that they bought in a ''hot'' market. When they look at their home value in 5, 10, or 20 years they'll have wished they bought sooner.

Thanks again for your input James, and everyone else in this thread!

George W. · Answer

Prices of new homes are defintley gonna keep going up for a while. There's such a skilled labor shortage to build houses it's not even funny. Prices of materials has skyrocketed. Land to build new houses is getting rarer in areas where it's more populated and because of that most builders around here seem to get the most bang for their buck.

either a giant mcmansion goes up or tightly spaced low income housing seems to be all they're building around here.

My opinion is that we have a disappearing middle class but that's a whole different topic

John Morgan · Answer

I’ve never seen it this hot during the traditionally slow time of year. 2021 will be insane at this pace. And if inflation starts to pick up then I don’t see it slowing down for years. It’s a good time to be buy n hold investors.

Daniel Smyth · Answer

@Forrest Kalk

Those who have cash will do well as usual!

Those who overextended themselves will take that chance that they too will be renting a d or c class place for a few years.

Foreclosures are already here. They will increase.  In my area more and more landlords have said enough is enough, and with people out of the property,  whole houses can be on the street in a couple hours, sometimes in the early hours of the morning!

It's just what I see. I am fortunate to be protected from such things right now, but don't at all feel that I would stand by and allow squatters in my properties while I must pay MY expenses!

Prices will drop for the lower class properties, and remain deal able for the medium ranges.

New houses built on speculation that the market will rise? I feel that many of these will go reasonably lower, rather than where the talking heads say are going.

Cash is king. Credit only works when others have credit to gamble with!

Its going to be a ride! Keep one hand strapped securely,  but not so tight that you can't get off before the steer falling on you will break your legs!

I am not afraid!

What's the Market Going to Look Like in 2021?

Most Popular Reply