In January 2021, we saw three major themes in the housing market:
1. Home prices surge as demand remains strong and low inventory persists
December 2020 added 5,280 new listings into the market but did not meet the demand as 6,883 listings went pending (mutually accepted offers)
2. Mortgage rates are on the rise but are still fairly cheap
Mortgage rates are averaging 2.79% for a 30-year fixed-rate loan, up from last week’s all-time low of 2.65%
Mortgage rates are still relatively affordable compared to last year's 3.65%.
Refinance loan applications nearly double from last year
3. Home appreciation peaks to the highest level since 2014
According to CoreLogic® Home Equity Report, Washington State homeowners saw an average equity gain of $36,800 in Q3 2020 compared to Q3 of 2019.
Home equity gains and home prices are expected to continue climbing, however, at a slower rate than in 2020.
The strong real estate momentum from 2020 is continuing into 2021 despite a small increase in mortgage rates. While inventory did see an increase in December, the demand for housing was too substantial, causing inventory to shrink yet again. December 2020 added 5,280 new listings into the market but did not meet the demand as 6,883 listings went pending (mutually accepted offers). With just over a two week supply of homes on the market, homeowners looking to sell their investments continue to have leverage over the offer purchase price and contract terms.
One of the factors for the enthusiastic buyer demand is undoubtedly the historically low-interest rates in 2020. This week, we saw mortgage rates slightly increase to an average of 2.79% for a 30-year fixed-rate loan, up from last week’s all-time low of 2.65%. Even with a modest interest rate gain, rates are still very affordable when compared to last year’s 3.65%. Low-interest rates not only increased demand for housing but also nearly doubled refinance loan applications from last year, as homeowners looked to decrease their mortgage payments.
Extraordinary high demand coupled with low inventory has contributed to the highest home appreciation and home equity gains since 2014. According to CoreLogic® Home Equity Report, Washington State homeowners saw an average equity gain of $36,800 in Q3 2020 compared to Q3 of 2019. Looking ahead to the near future, home equity gains and home prices are expected to continue climbing, however, at a slower pace than in 2020. The main reason for this slowed down pace is the increase in new home construction and more existing for-sale homes easing supply pressures. 2021 is gearing up for another hot real estate year!
