What will Happen to Real Estate in 2021?

The new year has arrived and people are curious about what is going to happen to the Denver real estate market in 2021. To predict what might happen in the coming 12 months, we took a look at the November snapshot from the Denver Metro Association of Realtors.

       

You can see the number of active listings right now at the end of November was 3,415. This was down about 50% from where it was this time last year. If you take a look at the last 20-30 years or so, the normal amount of inventory is around about 14,000 homes. This means we are running on a very small number of homes and condos being available for sale. There is a sense of scarcity because of this, which in turn, is causing prices to go up.

Why is this happening?

Close prices are up about 13% on average so far this year versus last year. This can be misleading, the number of entry-level homes available to be purchased is much smaller than normal. On the other hand, the inventory is about normal for the number of luxury homes and near-luxury homes. Additionally, the more affluent buyers in our market have been the least impacted by the recession. They are still able to go buy homes and they are taking advantage of the record low-interest rates. As a result, we sold a rather extraordinary number of luxury and near-luxury homes this year. However, we haven’t sold nearly as many entry-level homes as you would expect. They are just not available on the market. Also, the buyer pool for them has been more affected by the recession than the affluent buyers have. When you see the average prices up 13.1% this year, it is really a mix of what we sold has skewed towards a more luxurious product.

So, what will happen to real estate in 2021?

With two vaccines released, the projection seems to be that most of us in America that want to get the vaccine should have it by around early summer of next year. Our expectation is that the economy is going to start to improve quite a bit because of this. The people who would like to sell their home, but have been reluctant due to COVID, may become more confident. This should lead to more inventory and a large increase in the number of homes for sale on the lower end of the real estate market in 2021. All the people who should have sold in 2020 that didn’t should be listing this next year, in addition to, the people who normally would be selling in 2021 anyway. By the middle of next year, there should be a large increase in the number of entry-level homes sold. With that being said, a lot of the people who would have bought a luxury home next year did already. This should cause the price change to compress a lot. It wouldn’t be surprising if we see a couple of months where the price goes down on average. This won’t mean that everyone’s home price will go down. It just means that we are selling more entry-level product and less luxury product. We predict that around mid-July of 2021, the average amount of price increase will start to slow down from the 13% range to something more around 4%. The marketing time for homes should stay near historic lows. If you are thinking of selling a home, 2021 should be a fantastic market to do so! Check out this video with our founder Lon Welsh for more information, click here.