Upper Midwest Residential Real Estate Outlook for 2021
Market shows strong indicators, reason for optimism.
Posted: January 26, 2021 by Anna Jotham
The residential real estate market in the Upper Midwest has some strong indicators as we move into 2021. While analysts eye COVID-19 and its related effects, we're seeing reason for continued optimism for those looking to sell — and reasons for buyers to secure the ideal Realtor to guide them through a potentially very competitive landscape.
Let's take a closer look at how the year is unfolding for residential real estate in the Upper Midwest in the coming year.
Contributing factors shaping the 2021 residential real estate outlook
Whether you are thinking of selling a property in 2021 or looking to buy, understanding the dynamics at play in the regional residential property market can help. We see several factors influencing the residential home sector in the Upper Midwest in the coming year.
Historically low mortgage interest rates will continue to bolster demand.
Mortgage rates have helped entice buyers for some time now, and we expect that trend to continue. With historically low rates, buyers can secure the capital they need to purchase a home and pay less in mortgage interest over time, which can amount to substantial savings. It's no wonder buyers are so eager to put in an offer on a home. We could see mortgage rates start to rise mid-year, which could inspire buyers who have been on the fence to lock in before missing out on those tempting rates.
Inventory could remain tight and the field competitive.
First-time homebuyers, largely comprising millennials and Generation Z, are expected to continue to seek starter homes in the highly competitive price ranges of each market. Inventory has been tight for some time nationwide for affordable and starter homes, leading to multiple offers above asking price in some markets, including here in the Upper Midwest. We're expecting others in this age bracket and above who have already owned starter homes to seek higher-priced properties. Nevertheless, we could see some loss of momentum once we move out of the spring homebuying season and a modest rebound of inventory by the end of this year. Some analysts predict more new homes will be constructed in 2021 compared to any year since 2006. That could bring some much-needed relief to those buyers who have had a hard time in the competitive seller's market.
The COVID-19 vaccines could be a shot in the arm for home sales.
As the COVID-19 vaccine's availability becomes widespread and the population at large becomes inoculated against the novel coronavirus, we anticipate a bump in economic growth that will be reflected in home sales. Optimism is sure to rise in the wake of this, along with a return to normal consumer behavior; look for this to heat up the River Valley region, Wisconsin as a whole, Southwestern Minnesota, Iowa and beyond.
Home offices could continue to be a draw for buyers, even as we return to work.
With more of the regional workforce working from home, buyers were increasingly interested in listings that showcase a home office throughout the past months of the pandemic. Even as the workforce trickles back to the office, we expect demand for remote workspaces to remain high. Even before the pandemic and safer-at-home orders, working from home was a growing trend. In the coming year, buyers trading up may be looking for more space for their home offices, including outdoor spaces suitable for work and relaxation after office hours.
Buyers will move to the burbs.
The housing market continues to remain robust in the face of the challenges presented by the pandemic, and we've seen a notable uptick in buyers seeking more space and homes outside urban centers. That could be good news for our region, which offers a high quality of life, affordability, and the luxury of space over cramped urban centers, even in mid-sized midwestern cities. Whether renters or buyers, we expect this migration could continue throughout 2021. This trend could be further bolstered by the work-from-home workforce as well.
Put your residential real estate goals for 2021 within reach