2021 Market Update with Rick Sharga
After an unprecedented year, everyone has questions about the real estate market. Thankfully, data-driven experts are here to provide us with the answers we’re seeking!
Side was thrilled to have the Executive Vice President of Marketing at RealtyTrac, Rick Sharga, sit down with us at our Side x Side Virtual Forum to discuss his specialties: real estate, mortgages, and foreclosures.
As the leading source of foreclosure information for investors, consumers, and agents, Sharga dove into his expectations for 2021’s market — giving special consideration to the end of the mortgage forbearance period and a potential shift in the distressed property market.
5 Key Takeaways
1. WHAT IS THE BASIC OUTLOOK FOR 2021?
Combined with successful government programs that actively reduced foreclosure rates, the national housing market is poised for continued growth in the coming year. Inventory continues to be low and as a result, demand is outweighing supply, resulting in higher prices.
2. HOW DOES THIS RECESSION COMPARE TO PAST ONES?
Sharga noted that today’s recession is unique because of its quick recovery capacity. In a single quarter, nearly half of the jobs lost were recovered. Since then, the rate of job recovery has slowed, but that initial recovery was unheard of compared to past recessions. In the Great Recession, it took nearly a decade for jobs to recover.
This recession is also different in that it has not impacted the housing market nearly as much as other economic crises. Sharga identified the three reasons why this is happening:
1. Home supply is historically low.
2. Home demand is notably high.
3. The rate of loan defaults and foreclosures aren’t anything like the Great Recession.
3. WHY IS THERE A STRONG DEMAND FOR HOMES?
While some analysts predicted a substantial decline in home sales after the pandemic, the opposite happened.
“The pent-up demand from 2020’s first quarter manifested itself in increased sales as we got through the summer months and into the fall,” said Sharga. “By the end of November, home sales were ahead of 2019 year-over-year… That’s really a testament to the strength of the housing market.”
Sharga named three factors that are driving the demand for real estate:
1. Historically low interest rates turned fence-sitters into active home buyers.
2. Members of the Millennial generation are turning 35, which is the average age of home-buying.
3. The pandemic accelerated the shift from urban Millennial renters to suburban Millennial homeowners as people sought more space during quarantine.
4. WHY IS THERE A LOW SUPPLY OF HOMES?
The National Association of Realtors indicated that supply is at the lowest level we’ve seen since they began tracking the national housing inventory.
Sharga names three reasons why there is such a low supply of homes:
1. The inventory of new homes is low.
2. Existing homeowners are not putting homes on the market as people are reluctant to host open houses during a pandemic.
3. Many homeowners don’t feel financially secure enough to take on the commitment of buying a new house.
Right now, these are the barriers that are keeping homeowners from listing their properties for sale. Looking ahead, Sharga anticipates that these existing homes will eventually be made available for sale.
5. WHY DON’T WE HAVE TO WORRY ABOUT LOAN DEFAULTS AND FORECLOSURES?
Borrowers defaulting on their loans and moving into foreclosures is a big concern in today’s housing market. However, Sharga pointed out that “we wouldn’t necessarily need to worry as much about this as we would have ten years ago.”
Government assistance is alleviating the burden. The Forbearance Program that was a part of the March 2020 CARES Act seems to be working at keeping foreclosures in check.
Recent data showcases that “87% of the people who’ve exited the forbearance program are successful.” Instead of foreclosure, they either paid the loan, created a repayment plan, applied for a loan modification, refinanced, or sold their property.
In closing, Sharga anticipates “the housing market surge we saw in 2020 should continue throughout 2021 because of demographics, low interest rates, and the key trends that the pandemic accelerated.”
“We should see home prices continue to rise, but the rate at which they’re rising should begin to slow down as we see new inventory coming to the market from builders and more existing homes being listed.”
Thanks so much to Rick Sharga for going through the ins and outs of today’s real estate market with us!