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Experts expect mortgage rates to remain low for first half of 2021

Experts expect mortgage rates to remain low for first half of 2021
Posted at 1:22 PM, Dec 02, 2020
and last updated 2020-12-03 15:41:23-05

COVID-19 will continue to impact the housing market heading into 2021.

If you're looking to buy, experts say the first few months of the year are the time to do it.

A housing forecast out Wednesday from Realtor.com finds mortgage rates will stay low, but only for the first half of the year.

“We expect mortgage rates to increase near 3.4% by the end of the year, which would in any other year be record lows, but following on the heels of 2020, 3.4% is up a bit, but still historically low broadly speaking,” said Danielle Hale, Chief Economist at Realtor.com.

Home prices have gone up by double digit percentages over the last couple of months. Some of that is expected to slow down as mortgage rates go up.

Realtor.com is forecasting just below a 6% increase in home prices for all of 2021, but affordability is going to be a growing concern.

“The housing market has been historically challenging for first-time homebuyers, with prices rising as dramatically as they have in the second part of 2020, first-time homebuyers are seeing a bigger gap between what they need to bring to the market for a down payment and what existing homeowners have in the way of home equity to use to trade up,” said Hale.

If you already own a home, you may be thinking about selling when you see what it's worth now.

Sellers are expected to continue to have the upper hand throughout 2021, with more buyers than homes for sale.

You may see more competition with home construction ramping up, leading to more options available.

“For existing homeowners, in particular who want to stay up in their home, the fact that we have still low mortgage rates in 2021 creates opportunities for them to consider remodeling to make their home a more suitable place for them to age in place,” said Hale.

Another trend that's expected to continue in 2021 is interest in the suburbs. People have been moving out of cities as they're working remotely. Hale says the rising home prices and higher interest rates in 2021 could drive this trend as well.