2021 Real Estate Market Forecast

 

 

 

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Summary

What’s going to happen in the 2021 housing market? Direct and indirect factors will come into play…

 

DIRECT FACTORS: 

  1. Home prices. Prices are high. We’re in a housing bubble, but we don’t know when it will burst.
  2. Interest Rates. Buying power has gone up with low interest rates.
  3. Income
  4. Inventory. Prices continue to rise because demand is higher than supply. 

 

INDIRECT FACTORS:

  1. Employment. The real economy is based on people’s actual wages.
  2. Emotions. Buyers want to buy, while sellers are more cautious  
  3. Inflation/Deflation/Stagflation. The dollar is worth less as the Feds continue to print Fiat money. 
  4. Intervention from the Feds and the government through the following:
      1. Lockdowns. This slows down the economy.
      2. Keeping interest rates low.
      3. Pumping money into the markets & economy.
      4. Forbearance and eviction moratoriums. This suppresses the inventory.
  5. Migration. More people are moving to the suburbs.

My short-term prediction for real estate in 2021 is people are going to keep moving at a limited number. There’s still going to be very low supply.

In the long-term…emotions will run high when forbearance ends & unemployment continues, supply will go up as people decide to sell, and government stimulus will have less impact.

The future of real estate is not what matters.  What matters is YOU. Be prepared & productive, equipped & effective. Because THE BEST don’t wait to see what’s going to happen.  They find the opportunity and win in any market.

Full Transcript

What is going to happen in the real estate market in 2021? 

In this video I am going to give you my 2021 real estate market prediction. And yes, that’s going to come at the end, but before we get to that actual prediction, I’m going to talk about what are the factors that are in play today, what are the factors that have been in play in 2020 through the pandemic, through all the politics and everything, what are in play now, what is in play, and what is coming that is going to determine what happens with the real estate market in 2021 and beyond, and then at the end, I am going to give you my personal prediction of what I believe is going to happen and why I believe it’s going to happen. 

And I’m going to tell you how it affects you, what really matters. At the end of this video, I’m going to tell you what really matters if you want to be successful as a real estate agent, regardless of what happens in the real estate market. 

So let’s talk about 2021 real estate market prediction. What’s happening right now, and what are the factors that will determine whether the real estate market is going to continue to go up, or if it is time for the bubble to burst and everything to come tumbling down.

So here are the direct factors that are going to be at play in 2021 when it comes to the real estate market. I’m going to talk about direct factors and then I’m going to talk about the indirect factors. 

 

Direct Factors that Affect the Housing Market

 

1. Home prices

Are they going to go up, are they going to go down?

Now, here is what we know for sure, home prices have in most of the country, most of the United States and beyond, they have continued to go up. Now, there’s some factors we’re going to get into as to why that is happening, but I want you to notice something, and that is that the Case-Shiller index, which really indexes home prices over long periods of time, adjusted for inflation, how and where are home prices today? 

And here’s the thing, that when you look at home prices adjusted for inflation since 1900, in 120 years, there have really only been two housing bubbles in the last 120 years.

The first housing bubble was from 2000 to 2006, that was the very first one. If you go all the way back to 1900 based on inflation, based on the actual value of the dollar and the prices based on inflation, there has really been a pretty flat line for over 100 years of just prices were pretty much the same, with the exception of the great depression when home prices dropped for a period of time, but then they came back and they pretty much maintained for literally a century.

And then something happened around the turn of the millennium, where the feds got involved, the government started doing all kinds of weird stuff, the financial market started doing some weird stuff with mortgages and so forth, and all of a sudden you started seeing a housing bubble from 2000 to 2006, and then it burst. The second time in the last 120 years, where there has been a housing bubble according to the Case-Shiller index is from 2012 to 2021, where we are today.

Now, I want you just to notice that from 2000 to 2006, we had a bubble that popped in 2006, 2007, and it was six years before our home prices bottomed out in 2012, and then it went right back into a new bubble. So that’s important. In other words, whenever a bubble pops, it does not pop for six months, it is a long-term adjustment that is coming. 

So one, home prices right now are high, and historically they are in an extreme bubble right now. By the way, the NAR just announced that in 2020 there were more homes sold in the United States than there have been sold in any year in 14 years. Now, what was 14 years ago? Ah, it was 2006, the last time we were at the very top of a bubble. 

So just looking at history, these are things to take into effect of where are housing prices today based on history, housing prices today are extremely high. What does that mean for the future? It means we’re in a bubble, and bubbles at some point burst. The question is when? So what are the factors that are going to determine in 2021, are prices going to continue to go up, are they going to level out or are they going to go down?

2. Interest rates.

Interest rates are a big deal when it comes to buying houses, because the lower interest rates are, the more buying power your dollar has. And a lot of the price increases over the last several years have not been so much because the economy has gotten better or because wages or income has gone up, it’s because the buying power has increased because the interest rates have gone down. 

3. Actual income.

How much money are people making? If you’re making less money, you can’t buy as much. If you’re making more money, you can buy more. So what is happening to the income? Well, we have been in an economic downturn since coronavirus hit, where wages have suffered. 

Now, there’s some people making more money and there are some people making less money, that’s going to come into the indirect factors that affect the housing market. But one is how much money are people making?

4. Inventory.

The amount of inventory is the main driver of the concept of supply and demand. When there’s more demand than there is supply, it’s a seller’s market. When there is more supply than there is demand, it is a buyer’s market. And we are still and have been in a market where there is less supply, there is less inventory than there is demand, and therefore prices have continued to go up. 

 

Indirect Factors that Affect the Housing Market

1.Employment

It’s not only about how many people have jobs and how many people don’t have jobs, but also how well are the jobs paying? So wages also are a part of that. Again, it goes back to this idea of income, but the real economy is based on how much money people are actually making. Are wages going up or are wages going down, and how many people are actually employed, how many people are not employed? Again, it is not directly determining the housing market, but is an indirect factor in it.

2. Emotions. 

How do people feel about the housing market? How do buyers feel? How do sellers feel? Are they confident or are they cautious? Do they believe things are going to continue to go great, it’s a great time to buy, it’s a great time to sell? What are buyers and sellers feeling? Where are their emotions? 

Now, right now, buyers are like, “Okay, interest rates are low, there’s no houses, man. We got to buy, we got to buy.” Sellers are like, “We’re not selling right now,” for whatever reason. But the emotion is not like, “Oh my gosh, we got to sell.” 

So you don’t see people rushing to the market to sell their home, what you see is people finding to get a home. So there is this sense of emotion, this feeling that, “I have to buy a house today.” Now, that’s for people that are actually in the market, there just happens to be more of those than there are in most markets of people selling.

3. Inflation, deflation, stagflation

Are prices going to go up? Is the value of the dollar going to go down? Is it going to stay the same? Is it going to go up? As the Fed continues to print more money, push more money into the economy, into the financial sector, into the markets, the dollar over time has to become worth less because there are more of them without anything else backing it up. 

Okay, so at some point you have to deal with the reality of inflation. And one of the things that’s happened over the last year is when you look at just the prices of commodities, everything from corn, to soybeans, to oil, to copper, to precious metals, prices have gone up. The buying power of the dollar has gone down, but is that going to continue?

And with the real economy still in turmoil, which is another big part of this is, let me go back to employment, is the continued number of people filing for unemployment has spiked when coronavirus first hit last year, and the economy got shut down and all that, and then it came back down, but it’s leveled out. 

By the way, it has leveled out for now months and months, and months at record territory. In other words, pre-pandemic there was never a month, never a week where we had as many people filing for unemployment as we have had now every single week, week in and week out now for over coming up on a year, actually it was really when this all started happening was in April of 2020. So the fact that there is a lot of unemployment is still a big part of this. 

4. Intervention. 

Intervention into the whole game of the economy and the housing market. And what am I talking about? I’m talking about, we’ll just call them the big boys. I’m talking about the powers that be, the government and the federal reserve. I’m talking about the stimulus that is coming from the government, from the federal reserve, that things that are being pumped into the economy to keep it moving, to keep it going, to keep things rocking, to keep that housing market strong, keep the stock market going, keep people having money and all of that kind of stuff.

How is the government and the feds, so we’ll just call them the powers that be, how are they going to intervene? So there’s ways that they intervene in positive ways to boost, and there’s other ways they’ve intervened to stop things:

  1. Lockdowns. They stagger the economy. Now, whether you believe that they help stop the spread of COVID or not does not matter, what matters is we know for a fact that lockdowns cost people jobs, they cost businesses, they make businesses close, and they make some businesses go out of business and other businesses just to make less money. All right, the bottom line is that it drives the real economy down. When you drive the real economy down, income at some point is going to be affected by all of that.
  2. Keeping interest rates low. Artificially keeping interest rates low has a major impact on what happens with mortgage rates. When they keep pumping money into the markets and the economy, what is going to happen now in 2021? How’s the government going to respond? Are we going to have continued lockdowns or are lockdowns going to ease up? What’s going to happen with the vaccine? That again is intervention into the current situation that has a lot of impact on lockdowns, on the economy, on jobs and all that kind of stuff. So interest rates, keeping interest rates low. How much money is going to be pumped into the economy, whether it comes as a direct stimulus to citizens or it’s being given into the markets or to state governments, whatever it is, how much input are they going to have in pumping money into the economy?
  3. Forbearance and eviction moratoriums. These have been going on now for nearly a year. And one, people that have mortgages, not making payments can’t afford the payments, so they go into forbearance, which means they don’t have to make payments. And then the eviction moratorium, where it says, hey, if tenants aren’t paying rent, you still can’t evict them because we’re in a time of major crisis. All of that is intervention by the big boys. In other words, this is not being driven by the free market, this is being driven by policy that is saying, “Okay, you can do this, you can’t do this. You don’t have to make a house payment and you can stay in your house.” All of that is in play right now. What is going to happen in the future with all of that? Okay, well, with the lockdowns, hopefully, we’re going to have fewer lockdowns in 2021 than we had in 2020, the economy is going to be able to open back up, and hopefully that will help in a natural, a real organic recovery than simply by continuous symbolism.
  4. Pumping money into the markets & economy. Now, all indications are that the government is going to continue to try to stimulate the economy and produce more stimulus checks. That’s everything that based on the new administration, and Congress, and all of that, that looks like that is going to happen. So that’s going to keep things moving. Assuming that happens, that is going to keep money coming in the stock market. The feds are just going to keep printing money, pumping money in, and going to keep interest rates low artificially. They’re going to keep just doing everything they can to stimulate the economy and they’re not worried about inflation. All they’re worried about is keeping the economy going.
  5. Migration. We’ll just add this here, migration, and that is where our population’s moving. And so, you have a lot of people leaving the major cities, they’re moving to suburbs, they’re moving to other states, wherever, whatever, but there’s a lot of that movement.

So you look at major cities like New York city, San Francisco, Chicago, Los Angeles, these are cities where there’s a lot of people moving out. And because of that, there are massive vacancies, especially in downtown areas. In the city, suburbs are not so much, people are moving to the suburbs, sometimes cases, people are leaving the states and they’re moving to different states. They’re moving to states like Texas, they’re moving to states like Colorado or Utah, or Nevada, or Arizona, where there is a lower cost of living, lower relative real estate prices and so forth. So you’ve got a lot of those things in play as well.

Okay, that’s what’s happening right now. That being the case, based on that, then the housing market, the things that are driving it, people will still have money, you still have income and you still have a lot of people making a lot of money, and then you still have almost this idea of the rich are getting richer and the poor are getting poor. That’s a problem, it’s a dichotomy, it’s way beyond the scope of where I’m going to be able to go in this particular video. But interest rates stay low, income, people continue to have money.

Certainly people are in the market to buy a house. The inventory, because this forbearance is continuing, nobody that needs to sell has to sell. In other words, if they can’t make house payments, they don’t have to sell, they’re not going to sell. They’re not going to put their house on the market. But the day comes when forbearance ends. The question is, when is that going to come?

So one year from when the pandemic really started, we’re talking about March and April of 2021 coming up this spring is that first 12 months of forbearance, if that starts ending for people, whether it’s not extended, or whether people just look at it and go like, “Man, I haven’t been making a house payment in months and I’m not going to be able to make it.” It’s time to sell, all of a sudden you have more inventory hitting the market, or if forbearance gets extended until this fall, six more months, whatever it is, we don’t know yet, eviction moratoriums, those are already been extended. All of that means investors can’t sell, because how are you going to sell when you got somebody occupying your rental property and they’re not paying rent and you can’t get them out? It makes it very difficult to sell.

So all of that creates this inventory that is not materializing. Even people that can’t make their house payments and need to sell, they don’t have to sell right now. And why would they sell when they can live there for free? It’s just economics, it’s just money. So all of these things are happening and in play, and how do all of those play out over the next 12 months and beyond?

 

What’s Going to Happen?

All right, so here we go. Here is my prediction for what is going to happen. I’m going to give you my prediction, both short-term and long-term, and this is where it gets a little bit fuzzy, but I’m going to then tell you, okay, what do you need to do to prepare for and what really matters in this whole thing? Okay, so first let’s talk about short-term and let’s talk about long-term.

 

SHORT-TERM SCENARIO

So short term, here are the factors, supply or inventory, interest rates, demand, which is a factor of inventory, and how many people want to buy it, number of buyers in the market and then prices. 

So in the short-term, with everything that’s happening, with the intervention from federal government, from the feds pumping money into the market, stock market stays up, presumably, and I think that’s going to continue to happen to the stock market, because they’re still pumping air into it, pumping air into it. It’s all artificial, it’s totally separate from the real economy where you still have millions of people unemployed that have normally not been unemployed. You’ve got businesses are closing businesses that are making less money than they were.

And by the way, let me just say this one thing, there are a number of businesses, you look at the stock market and they talk about the S&P 500, and it’s just in record territory and all this. Well, there are six companies out of the 500 that represent 40% of the capitalization value of all the S&P 500. So you got six companies that are doing really, really well and that’s driving the market. But what you got to understand is that in America, nearly half of all businesses and all jobs are small businesses. 

They’re not on the stock market, they’re the restaurants, they’re the hardware stores, they’re the little mom and pop operations, many of whom are closed right now. Depending on where you are, some of them are closed, some of them are open at limited capacity. And all of that is happening, that is nearly 50% of the jobs in America, and it is nearly 50% of the GDP in America, and there is a lot of pain out there.

But again, the government keeps pumping, pumping, pumping, keeps interest rates low, and people that can’t make house payments, they don’t need to move, they don’t have to move, they don’t have to sell. So supply, and this is at least for the foreseeable future. Now, when I say this, I’m looking at 2021, and just saying, “This is what is going to be happening for the foreseeable future in 2021.” 

Now, at some point in 2021, this could all change, but it’ll change based on these factors. One for right now, the supply is going to continue to be low. We are going to continue to have a low supply. Interest rates are also going to stay historically low. The feds have already said, “We’re going to keep interest rates low,” they ain’t going anywhere. So they are going to stay low probably for at least all of 2021 and in the foreseeable future, even beyond that.

Because of that demand is probably, for now, going to stay high, certainly higher than the supply. And because you have low supply and high demand, you obviously have upward pressure on prices. So prices in most markets are going to continue to grow. Now, here is one little footnote or factor, one caveat, and that is not every market in the United States is the same. 

My short-term prediction for real estate in 2021 is people are going to keep moving at a limited number. There’s still going to be very low supply. People that don’t have to sell aren’t going to sell. If you get a listing, it’s sold. It’s hard not to sell a listing in this market. And I think that is going to continue because that prices are going to continue to go up for the foreseeable future in 2021. Now, it may end before 2021, all this may change.

 

LONG-TERM SCENARIO

Long-term prediction, here’s what’s going to happen. At some point, everything turns. Everything that’s happened for the last year in the economy and for the last eight or nine years now in housing prices, we are clearly in a bubble. The stock market, clearly in a bubble. Now, again, you go back to the factors that are driving this, housing prices are staying up. Why? Because inventory is low, income for people that can buy is still there, and interest rates are still low.

Now, what’s going to happen as we go forward here, long-term, is when forbearance ends, when you look at all these indirect factors, when you look at the employment situation and it continues to get worse, or it doesn’t get better. Emotions, if all of a sudden people get scared. And this is what happened in 1929 when the great depression started, was panic, and they still can’t put their finger on what exactly was it that caused everybody to freak out. I don’t know, but they freaked out.

So at some point, emotions and consumer confidence go ballistic and people start freaking out and they start panicking on Wall Street. If Wall Street starts to tumble, all bets are off. Guess who’s buying all the mortgages nowadays, mortgage backed securities are being bought by the government, by the feds. They’re buying them, they’re buying it all up. What if all that starts collapsing? There’s the collateralized debt obligation, there is a bubble in place in the financial markets that is rivaling, if not surpassing, what happened during the global financial crisis, 2008, 2009.

So all of that is in place. Inflation. If inflation starts kicking and prices start going up, now we still may see a period of deflation. There’s, again, so many factors that could happen. Government policy, there comes a point where stimulus quits stimulating, it just quits having the same impact. And so, right now they’ve had to keep increasing, keep increasing, where before, if they put $10 billion, it did something. Now they put a trillion and it doesn’t seem to have the same impact. So long-term.

Supply. Once forbearance ends and all of a sudden people get scared, then all of a sudden people start putting their house on the market, supply goes up. Interest rates are probably going to stay the same for a long time. They could start going up at some point in the next year, but probably not. Demand, if people start freaking out, if employment keeps not working, people aren’t getting jobs, and all of that, boom, you could have a drop in demand. This is when you get into a problem. And all of a sudden when that happens, long-term, prices are going to fall. The biggest factor in all this is the fact that we are clearly and definitely in a housing market bubble, a housing bubble, and a stock market bubble, and historically all bubbles pop.

Now, here’s what I’m going to tell you, it doesn’t matter. All of this you’re going like, “Well, you didn’t really tell me when it’s going to…” I don’t know when it’s going to happen. If there was a person out there who actually knew when it was going to happen, he could prove it, that would be the answer to end all questions, but it’s not there. But here’s what I want you to understand, it doesn’t matter. There is one key that matters, whatever happens in the real estate market in 2021 and beyond. And that key, my friend, here is the key right here. 

 

The Key is YOU 

I’m going to tell you something, in 2020, the average realtor in the United States who had been in the business less than two years, made less than $10,000. And according to NAR, there were more stay at home sales in 2020 than ever before, since 2006.

And yet, the average new realtor was still making less than $10,000. What does that tell you? It ain’t the housing market, my friend. I had new agents in their rookie year making a hundred thousand, two hundred thousand, three hundred thousand dollars in their first year while the average was only making 10,000, less than 10,000.

What does that tell you? The key is not the market. The key is what you do. It’s how you prepare. It is how prepared you are and how productive you are. It is how equipped you are and how effective you are in the current market, whatever it is. Whether the market is changing and where you’re having to adapt, or whether the market is just keep going on and you simply have to perform.

But here it is, the key is you. And here’s what happens, and that is, winners don’t wait. Winners find a way to win. And what I’m going to tell you is, if you’re a real estate agent, or you’re thinking about getting into real estate, or whatever it is, is it a good time to get into real estate? Well, it depends.

Are you willing to do what it takes to win? Then absolutely. Is it a great time to be in real estate? Is it a great time to get into real estate? Is real estate going to be good or is being a realtor going to be a good thing in 2021, 2022, 2023?

If you’re committed to doing whatever it takes to win, when the reality is most agents won’t. In five years, 80% of the real estate industry will be gone. And that’s just because that’s the way it’s always been. I’ve been in real estate for decades, over two decades. And here’s what I know, every five years there is an 80% turnover in the industry, which tells you that 80% of realtors fail every five years, every five years. And it doesn’t matter. Good market, bad market. 2007, 2008, 2009, over 400,000 realtors got out of the business.

That’s what happened the last time there was a market downturn. Whenever it comes, what are you going to do? It’s going to be up to you. Don’t wait to see what’s going to happen in the market. You get prepared, you get equipped, you get trained so that whatever happens in the market, you, my friend, can win.

That’s where I come in. YesMasters Real Estate Success Training, what we do is we help agents win, regardless of the economy, regardless of the housing market, regardless of where they live, regardless of how long they’ve been in real estate. If you want to win, I can help you with that.

Now, the next thing that I would invite you to do is join me at Agent Mastery Live, which is three days of full intense training on how to start a business, how to build a business, and how to win in this economy, in 2021 and beyond. Just go to https://www.agentmasterylive.com/ and get your ticket today. 

Now, I hope this has been helpful for you. If it has, make sure you give the video a thumbs up. I want to hear your comments. What are your thoughts? What did I miss? What would you add?

If you don’t like the video, give it a thumbs down, but please leave me a comment and tell me why you give it a thumbs down.

Subscribe to the channel. If it’s your first time here, play to win, and always expect YES.

 

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