Housing and Interest Rate Outlook for 2021
Between the Pandemic Politics Stocks and now Mortgage rates 2021 is off to the races! As far as our housing outlook for 2021, here we go…
Janet Yellen, former Fed Chair is now treasury secretary. She is quite different than the former Treasury secretary Stephen Mnuchin. Yellen, is known to be a bigger spender and wants to push stimulus.
You can see a direct correlation from the day Janet Yellen was appointed to the rise on gold, the rise in silver and the enormous rise in bit coin. Why? Because it is believed they will debase the currency make it work less, making fixed assets gain in value. The dollar is losing value, and the dollar has sank, and that does tend to raise inflation because it cost more to bring things over.
Also with the democratic house and senate, additional spending could see additional inflation. And the bond market hasn’t liked that to start the year and mortgage rates have been affected.
While rates have gone up from 2020, they are anticipated to stay low due to:
- Inflation pressured lower – Debt and Technology.
- Labor force down 10M hopefully come back to alleviate supply chain. Bring people back to work there is less constraint on supply. Help alleviate inflation and reduce pricing.
- Additional spending under new administration will increase supply of Treasuries to be sold.
- Rates likely to bump higher before resuming downtrend (experiencing now but many believe we will see a downward trend.
Housing Demand Should Continue:
The Median first-time homebuyer age is 33. What we are about to experience from what happened 33 years ago is an explosion in births so over the next 3 years we will have an explosion of 33 year olds or first time home buyers causing a huge amount of demand.
At the same time – supply has been tight and new construction hasn’t been able to keep up. Now we have this huge decrease in supply, causing prices to rise, homes to go quickly and it doesn’t look like it will go away anytime soon. Vacant home are near record lows -what does that mean? There is no incentive for sellers to drop prices. Inventory is also historically low due to COVID.
We do anticipate interest rates to be favorable and many reports anticipate 6% appreciation in 2021.*
*info courtesy of MBSHIghway