The 2020 homebuying market was different than any other. Prices were high, inventory was limited, and buyers competed for record-low mortgage rates. This was in spite of (and in large part because of) a global pandemic. According to a survey, potential buyers see 2021 as a rose-colored glass.
Our annual Home Buyer Report has highlighted optimism as a consistent theme. We have reported on the optimistic outlook of potential buyers since 2018, largely based on the percentage of Americans who intend to purchase a home in the near future. According to the NerdWallet survey, 11% of Americans plan to purchase a home within the next 12 months. This was based on a December poll conducted by The Harris Poll online among more than 2,000 adults in the United States. This would mean that there are 28 million potential homebuyers. It’s reasonable to consider that these 28 million home buyers are optimistic considering the fact that 5 million homes have been sold in the last five years and that less than one million homes have been built.
The positive outlook of so many people shows that there may be some relief from the stressors of last year. The survey revealed that nearly 2/3 of 5 people (39%) who planned to purchase in 2020 as of January 1, 2020, postponed or cancelled their plans due to the coronavirus panademic or other related effects. It is not yet clear how long the pandemic will last and what its effects will be.
Holden Lewis, NerdWallet mortgage and home expert, says that only a quarter of those people will buy homes in 2021. “Millions are looking to buy homes, and there is a lot of demand. Buyers must be able to overcome rising prices, competing offers and cautious lenders span>.
Key findings
Homebuying plans were disrupted by the coronavirus pandemic. 39% postponed or cancelled plans to buy a home in 2020 due to the pandemic. 43% completed those plans or were in process.
Home-shopping was difficult because of a lack of supply: According to NerdWallet analysis in 2020, active listings nationwide fell 26% compared to 2019, which made it tougher for buyers to enter the market.
Millions of Americans plan to buy homes in the future: Nearly 28 million Americans plan to purchase a house in the next twelve months. Another 26 million plan to be first-time buyers in the next five years.
Remote work allows many to look for new living areas. 44% of Americans have used remote work since March 1, 2020. 25% of Americans who have used remote work have purchased or planned to purchase a home in another location because of their remote access.
Recent home buyers face major financial stressors from ongoing homeownership costs. 41% of homebuyers who purchased a house in the last 12 months state that they have difficulty paying for home maintenance and repairs. 28 percent of homebuyers recently stated that their largest money stressor for the next two-years is making their monthly mortgage payment.
Pandemic wasn’t the only obstacle
Despite a strong homebuying market in 2020, many people chose to put off their homebuying plans and settle for virtual home tours in parking lots, closings in garage lots, or stiff competition.
23 percent of Americans said they were planning to purchase a house in 2020 by Jan. 1, 2020. However, 39% of homebuyers canceled or postponed their plans due to the coronavirus pandemic and related effects.
There are many additional hurdles for current non-homeowners. According to the survey, the most common obstacles that prevent this group from becoming homeowners are not having enough money saved (38%) or their credit score (32%). This would have been especially difficult to overcome in 2020. Lenders responded to the increased demand for refinance and purchase loans by raising mortgage rates. It was more difficult to obtain a mortgage if your credit score and liquidity were not good enough. However, there are still some options.
Lewis states that FHA and VA loans can be used by people with low down payments and poor credit but otherwise in good financial health. The Department of Veterans Affairs guarantees VA loans. They are a great deal for active-duty military personnel, veterans, and other people who meet the span criteria.
Tip for home buyers: It is harder to get a mortgage now than it was one year ago. There are more requirements than ever before, making it harder to obtain traditional mortgages that were less restrictive. Your credit score will determine how likely you are to secure a low rate.
2020 buyers were able to find homes in short supply
The 2020 crises are not a deterrent for every homebuyer. 43% of Americans planning to buy in 2020 either bought a home or were currently in the process. This was due to the fact that potential home sellers were holding back plans because of the pandemic.
28 percent of homeowners currently say that the coronavirus pandemic prevents them from selling their homes. This is more than one-fourth. Low inventory was the beginning of 2020, which only got worse when lockdowns started in March.
According to data from Realtor.com, the average number of active listings in 2020 was 914,000, while there were 1.3 million in 2019. This is a 28% decrease in year-over-year listings.
Tip for home buyers: It is unlikely that the supply of houses will rebound to its previous levels by 2021. Buyers should be prepared to bid elbow-to-elbow alongside others. Competitivity is key to successful offers. In some markets, even offering the full asking price might not be sufficient. Talk to a local agent about market trends in your area. To stay competitive, increase your price if homes sell for more than they ask.
Potential buyers are optimistic about 2021
According to the survey, millions plan on purchasing homes in the next few years. Many of these people will be buying their first home. Over the next five years, 26 million Americans will be first-time home buyers. The 11%, or 28million, of Americans plan to buy a home within the next 12 months. This is the same percentage (11%) that said they would buy a home in 2020 when we asked them in our last year’s report. We found this figure to be remarkable.
58% of those who plan to buy within the next 12 month say they feel more confident about their ability to do so than in 2020. 59% of those who plan to buy in the next twelve months feel more confident about their ability to purchase because they believe the economy will be better in 2021.
43% of Americans say that the current economic and political climate will make it more likely they buy a house in the next year, compared to 49% last year.
Lewis states that “buying a house is a realistic goal for most people.” It might take longer to save money or build credit. As more vaccines are available and the economy recovers span>, people’s confidence in their homebuying ability will increase span>
School shape and remote work
Many companies gave their employees the option to work remotely after the pandemic. According to the survey, 44% of Americans work remotely at least once since March 1, 2020. This shift is changing the way people live.
25% of people who have worked remotely since March 1st (25%) say that they purchased or intend to purchase a home in another location because of their remote work environment.
Additionally, buyers are more likely to be spending time at home, as 53% of them plan to purchase in the next 12 month. 44% of them cited enough space for an office, while 44% stated that they would prefer outdoor living space. According to 41% parents of children younger than 18, adequate space for learning at home is a key factor in deciding whether or not to make an offer.
Tip for home buyers: Being able to commute to work can make it easier to find affordable housing in different areas and states. If you can reach a wider area, you will have more homes to choose than if you were in a smaller market. This flexibility can be used to your advantage. However, it is difficult to travel to new areas while the pandemic is raging.
New homeowners are facing financial challenges
Being optimistic when you think about buying a house doesn’t mean that you are financially secure. 83% of people who plan to buy a home within the next 12 month say they will experience financial stressors in the next two-years.
Ownership costs can be very burdensome for those who recently bought a home. About 2 out 5 people who purchased a house in the last 12 months (41%) say that they will have to pay for home maintenance and repairs in the next two years. More than one-fourth (28%), of recent buyers consider making monthly mortgage payments to be their greatest money problem.
It’s evident that some households have been hit hard by economic hardship in the wake of the recession. 24% of Americans cite the cost of groceries, utilities, and other necessities as their greatest financial stressors.
Tip for home buyers: Budgeting is just the beginning. Budget for home maintenance and unexpected repairs. A good rule of thumb is to keep about 2% of the home’s annual value aside for regular upkeep. A homeowner’s emergency fund should be larger than a renter’s. You are responsible for many expensive items that renters don’t have to pay.
METHODOLOGY
The Harris Poll conducted this survey online in the United States between Dec. 8-10th 2020 among 2,027 U.S. citizens aged 18 and over. The online survey does not use a probability sample, so it is impossible to estimate the theoretical sampling error. Anna Palagi, [email protected] can provide more information about the survey methodology including weighting variables, subgroup sample sizes and other details.
Population calculations are based upon the U.S. Census estimates of population as of July 1, 2019.