It’s hard to overstate how challenging the year 2020 was, the enormous economic challenges, and the challenges of the United States real estate market that are the foundation of our country’s economy. The turmoil will continue as long as the pandemic and geopolitical challenges persist. And while we must address the social and economic collateral damage left by an economic crisis, we must look to 2021 with optimism.
The real estate industry was the least affected and unexpectedly became a beacon of hope for an economy hit by the COVID-19 virus. Home sales soared, mortgage rates repeatedly hit record lows, and rising values boosted homeowners’ equity – a milestone in the real estate industry to this day.
2020 will always be remembered as the year of the coronavirus pandemic. However, consumers and economists project 2021 as a year of low mortgage rates and an unprecedented increase in mortgage refinancing is expected. For the first quarter of 2021, refinancing activity could increase up to 200%, due to the economic impact of the previous year.
Unemployment, another challenging factor left behind by the pandemic, is just one indicator of the health of a country’s economy. As the economy recovers, rates will increase, but it is difficult to predict at what rate. The Federal Reserve projects interest rates near zero through 2023, but if the economy recovers from the pandemic earlier, this could raise rates ahead of current projections.
The quick explanation of how a government stimulus affects mortgage rates is this: When the government needs money, it has to get the money from somewhere, so they create debt and offer it to investors in the form of bonds. , which provide a return on investment known as a rate of return. To get the money they need, the government could increase rates of return to make the bonds attractive to investors.
The mortgage rate often accurately reflects the 10-year treasury rate, which is why the second round of stimulus offered by the government would likely increase both yields and mortgage rates, which is why the real estate industry is one point of benchmark for the US economy.
Last but not least, I must highlight the value of real estate agents in the industry. In the midst of an unusual and difficult year, the professional work of real estate agents was reflected in the fact that, as Americans reassessed what they wanted from a home, they increasingly relied on the advice of real estate agents to guide them. . Through purchase and sale transactions. According to the latest survey from NAR (National Association of Realtors). 8% of buyers reported using an agent to purchase their home and 89% of sellers used an agent to help with the sale, reflecting confidence in our profession.
2021 will be a year full of enormous business challenges and at GLOBALWIDE REALTY we are ready to continue growing.
I wish you an excellent start to the year.
Broker / CEO