Most homebuyers are now buying virtually
Here’s a look at the latest developments in the mortgage market for the week beginning 2/8/21.
- Two thirds of homebuyers shopped virtually in 2020
- Homeownership has grown in the last year—and it’s likely to keep rising
- Refinance applications surged during January rates dip
- What to expect from the 2021 housing market
Two thirds of homebuyers shopped virtually in 2020
Homebuyers became more comfortable with a virtual shopping experience in 2020, as 63% of buyers made offers on homes that they hadn’t actually visited in person. That’s a jump from 32% in 2019, before pandemic-related lockdowns brought much of the real estate world online.
The increase is largely driven by the pandemic and the ways in which agents have adapted to the new landscape: setting up virtual tours, virtual open houses, and video calls with clients.
Now that virtual homebuying has proven to be a viable option, will the trend continue once vaccines are rolled out? With competition as high as it’s been, it likely could. The average time that a home is up for sale is now 10 days shorter than it was last year. Being able to make quick decisions is key, especially in more affordable areas where prices are rising fast. Many buyers may not have the time or ability to tour a home in person, and feel comfortable making the offer knowing that it could possibly sell within days.
Shopping competition is expected to heat up as more people plan to buy a home this year, and sales activity is predicted to rise. Buyers may use virtual tours to be able to act faster, even when in-person home tours are safe again.
If you’re considering buying a home without an in-person tour, preparation is even more important. Read up on what to look for when touring a home, so that when it comes time to make an offer, you feel confident in your decision.
Homeownership has grown in the last year—and it’s likely to keep rising
The rate of homeownership in America proves to be on the rise now that 2020 numbers are in: 65.8% of the country’s homes are now occupied by owners. That’s about 1.8 million more homes than the year before.
It may seem surprising that homeownership increased during a year marked by economic hardship and nationwide lockdowns, but last year was still a great time to buy a home. Interest rates dropped to record lows over a dozen times, and many were motivated by work-from-home policies that allowed them to relocate outside of major cities or tech hubs.
Today, there’s still a large amount of unmet homebuyer demand as inventory sits at low levels, driving prices up. But with more people planning to buy a home in the next 12 months and a wave of new construction coming this spring, there are a number of opportunities in the market to meet that demand.
Rates are also expected to rise, but so far, they’re climbing more slowly than expected and haven’t deterred home purchases. Given that record low rates may have incentivized homeowners to refinance rather than sell, rising rates could lead to more existing homes being put on the market. And in Congress, a $15K tax credit for first-time buyers is being proposed, which could motivate homebuying regardless of rates and their unpredictability.
Refinance applications surged during January rates dip
Rates dropped in reaction to slower-than-expected pandemic recovery efforts in the last week of January and many homeowners took the opportunity to refinance. The number of applications jumped up 11% from the week before, marking 60% more refinance activity than this time last year.
The dip in rates was likely temporary, and we predict they could climb as high as 3.25% by the end of the year. That said, the climb is expected to be gradual and variations like this could keep the refinance wave going until spring.
Given that rates are always unpredictable, trying to time the market may end up costing more in the long run. Owners wanting to refinance may be better off locking in a rate whenever it makes the most financial sense to them.
What to expect from the 2021 housing market
As the pandemic continues to impact the real estate landscape, the question of what’s next may help inform important homeownership decisions. Here are our predictions of what to expect from the housing market this year, including when new inventory will be ready to buy, how high interest rates are expected to rise, and why homebuyer demand will likely stay strong through it all.
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