The books have officially closed on the 2020 real estate market for the Greater D.C. market and the results were truly remarkable. Home price increases again lead the way in the robust market we experienced in 2020 followed closely by increasing unit sales despite our continued depressed inventory levels. All three jurisdictions performed at elevated levels with NOVA once again leading the way. NOVA Home prices were up 9% YTD and unit sales up 7% followed closely by both Montgomery County up 6.3% in home sale price and 6.1% unit sales. Washington, D.C. landed at a very respectful increase in home prices up 6.5% and unit sales coming in at 4%. As we enter the spring market, all signs indicate the 2021 real estate performance will mirror the market of 2020 with some analysts predicting even stronger results. Although the virus has caused some concern, it has not and will not hamper the enthusiasm and demand for home ownership in 2021. Demand and low interest rates will be the driving forces with predictions for home price increases in 2021 ranging from 3%-9% depending on source but if 2020 is any indication, I would expect prices to land in the 5%-7% range at year end. The National Association of Realtors is forecasting a 9% growth rate for existing home sales in 2021 rounding out what many see as a very robust market. The housing market in 2021 will continue to be fiercely competitive. As home prices increase and demand remains high, affordability may start to become an issue for entry level and first time home buyers. As prices increase, affordability drops and this can have a negative effect freezing out a sizable portion of the home buying public. There has been some conversation on the political level regarding student debt relief and a proposed $15,000 first time home buyer tax credit to promote home ownership, thereby helping these buyers as well as the move up buyers. New construction will command a sizable portion of the home purchases in 2021. Analysts are predicting as high as a 23% increase in new home sales making this a significant segment of the local and national housing market. Housing starts are up 12.6% for single family homes but lot availability, skyrocketing building materials costs coupled with increasing labor costs will certainly have an effect on new home construction pricing. Major concerns with land prices and lot availability will drive developers further out from major job centers but the change in our view of the traditional work requirements vs the current trend of remote work requirements should offset this concern. Home ownership is expected to rise above 69% for the first time since 2005-a very positive trend for all the ancillary businesses that support home ownership. Millennials will continue to comprise a large segment of the home buying public with younger millennials (turning 30) making up the first time/entry level home buyer ranks and the older Millennials as move up buyers. Asian Americans will play a more prominent role in the home buying process as their income growth continues to rise. Expect Gen Z buyers to start making their presence felt in 2021 as well. The concern some have expressed with the mortgage forbearance offered to home owners through the CARES act should not constitute a major concern as lenders are willing to be more cooperative and less punitive managing any foreclosure issues that may arise. Unlike the last housing bubble crash where reckless lending, irresponsible borrowing and wild speculation contributed greatly to what that eventually led to, lenders and regulators have instituted reforms that guard against such behaviors today. Despite all that has transpired this past year and the challenges we face this year, the outlook for the 2021 housing market looks exceptionally bright. Ongoing progress in major transportation and building projects throughout the Greater DC area promise a return to a normalized business environment. Seller and buyers alike will be trying to take full advantage of the opportunities offered in the way of low interest rates, increasing inventory levels and a renewed desire for home ownership.
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