COVID-19 and 2020 were a paradox. A new and novel virus spread quickly around the world leading to shutdowns, layoff, stay-at-home orders, and an economic recession. After the initial shock and awe period, the housing market started to explode around the country, especially in Idaho—spurned forward by rock-bottom interest rates. Since then, the housing market has taken off. Now that COVID vaccines are beginning to be distributed, this is how we see the effects playing out.

It is important to note that these are based on trends we have been seeing over the last 12 months across the country. Idaho is very much reflective of the national real estate trends of 2020, so we will be focusing on Idaho and the Boise area, but these patterns are seen across the country.

More homes may go on sale, but buyer competition will continue

The housing shortage in 2020 was the result of many buyers pulling their homes off the market out of apprehension and caution about COVID-19. New home construction stalled for a few months, further decreasing the available number of new homes coming on the market as well as new lot development. This, coupled with a flood of buyers coming onto the market from more crowded urban centers out of state shifted supply down and demand sky high.

As we go forward through 2021 and the upcoming few years, we will see more new land development and newly built homes come onto the market as construction picks back up. This will help alleviate a certain amount of stress on the real estate market. However, we do not see the influx of out-of-state buyers to decrease in a meaningful amount in the near future. In addition, younger Millennials and the oldest of Gen Z are entering the market as first-time homebuyers. If the pattern holds, more homes for sale will be available, but buyer demand will most likely not slow down.

Plus, as more potential sellers get vaccinated, they may feel more comfortable putting their home on the market. As more potential buyers get vaccinated, they may feel more confident entering the buying pool. Hopefully, we get to the point where in-person tours and open houses become the norm again.

Prices won’t go down, but it’s a matter of how rapidly they will increase

The laws of supply and demand state that if supply is low and demand is high, prices will rise. Since there are plenty of buyers looking at a small number of properties, prices will continue to be high and keep rising quickly.

But as more homes get put on the market, price increases should slow down. In general, it is very dire when home values actually decrease. Because Boise and Idaho at large is a very desirable location with healthy incomes, low crime, and steady job growth, home values are still going to go up, just not at the rapid pace of 2020 and so far in 2021. As the market evens out, home values increases may go closer toward the national average of 3-6% per year.

Mortgage rates could rise slightly but will stay low for the time being

Mortgage rates hitting rock-bottom and then going lower formed the foundation of the real estate boom through 2020. Millions of homeowners across the country applied for loan refinances to try to save hundreds of dollars every month on their mortgage payments. These historically-low interest rates also served as the catalyst for hesitant buyers to enter the market and lock down a mortgage with these low rates.

As of writing this (Feb 4, 2021), Freddie Mac mortgage rates are at 2.73% for a 30-year fixed-rate loan. The lowest rate was 2.65% for a 30-year fixed-rate loan for the week of Jan 7, 2021. Mortgage rates are predicted to rise slightly in the coming year but stay stable below 3%. This is to help keep the economy more stable, but it is also helping potential buyers who may be on the fence about buying to enter the market and lock in these rates. This, coupled with the aforementioned high demand and low inventory, will keep the market as a hot seller’s market for at least the next year or two.

In conclusion, we expect the effects of 2020 and COVID-19 on the real estate market to stick around for 2021 and maybe the next couple years. For sellers, it is a great time to sell your home, make a healthy profit, and upgrade your living situation. For buyers, low interest rates will help lower monthly payments, and upcoming new construction will allow for more new homes to enter the market.