Massachusetts Spring Housing Forecast for 2021
Normally, I'd be writing this in January, cause normally the we already would have a good indicator of what the match between buyers and sellers will be. Not the case this year! I expect there to be some big changes as we go through the months. Let's look at some of the major factors that will likely affect the housing market this year.
I mean, duh, right? Honestly, it's the elephant in the room, and all the items that follow are one way or another CCOVID related so let's break them down. It's just too big an element to talk about effectively in one fell swoop, you've got to break it out.
Vaccination Progress of COVID
As of this writing, over 10% of Massachusetts has had one shot, about about 3.5% have been fully vaccinated. We're up to about 40,000 shots a week, and figuring they will be split 50/50 for the next month or so, that means about 600,000 additional people will be fully vaccinated in the next four weeks. That means we'll be over 13% vaccinated, which isn't super impressive except that teachers, healthcare workers, and the most vulnerable will be by and large fully vaccinated. If J & J gets there one shot dose out then those numbers move up even quicker - more supply, and just the one shot means we could be looking at doubling the current rate of vaccination by late April. But even without the J & J kicker, hospitals will be safer, schools could be back to in person learning - things that start to pave the way to feel safer. And the bigger kick of all will be that the mortality rate will drop very quickly. Roughly 60% of all deaths are those who will be vaccinated by the first or second week of March, and if we have the same success rate as Israel, virtually none of them will die. That probably sounds too good to be true, but I think news like this is going to break through at some point, as it becomes obvious just how effective the vaccines are.
Seasonal Decline of COVID
If you haven't noticed, cases are dropping dramatically across the country. It's official - the dreaded second wave has passed, although so far the media coverage has not been particularly robust. At their peak, we were seeing 250,000 cases a day in this country, but now we are down to 100,000. Still a lot, but down a massive 60% in just over a month. That means hospitalizations and deaths should fall too, but a similar 60% we hope, which would be around 1200 a day, or around where they were in August. Hospitalizations are down in every single state in the country, which I find quite remarkable. That's without vaccines- it should be noted that cases have been falling far faster than any effect from the vaccines. Why is a rather big mystery (nobody is out there in the media/medical community explaining the sudden drop in cases that I can find). There is a little talk (in the NY times, but not a lot of details) saying that the drop means we might be approaching herd immunity (again, not well explained), but if that is the case then we will likely see continued improvement in the numbers especially as the vaccination rates climb. If you look at some states that peaked early (Illinois), the rates are down about 80 percent, and if the rest of the country follows suit, that would be great. Really, this is all good news, and if the best case presents itself, March could be a month where sentiment turns.
Kids Return to School
Hey, this is a big one. Don't dismiss the size of the impact that this will have on EVERYTHING, housing included. First, it will feel a lot more normal, but second - and most importantly - the number of parents who will suddenly have extra time to either look for a house or plan to sell one will go up sharply. I know in the fall I was spending at least 18 hours a week on the kids and school (on top of my job), and I'm still around 6-7. That is a huge amount of time. This will also help if sports pick back up. When will this happen? Unsure. March, maybe. April maybe. But if there are problems, they'll go right back to remote or hybrid for the rest of the spring. So it is a huge thing to watch, but very uncertain at this time.
Overall Market Factors
On the flip side, if the COVID numbers improve, I expect interest rates to move higher. How much is the big question, but I think they will quickly get to 3.5% on a 30 year - perhaps higher. Those are still great rates - but they will diminish quite a bit of buying ammunition for buyers and that will put a hard cap on prices. Buyers are completely stretched at this point, and any movement in interest rates will change what they can afford.
What Will Happen To the Springtime Housing Market?
I think it is a given that all of these factors are going to happen. The question is when, and do they all happen at the same time, or do they space themselves out. Ultimately, it will probably change the timing of how things play out, but probably not the magnitude.
The most likely case is we start to see some houses come on in mid-March, or late March, and catch up a little bit with the delayed inventory cycle we are seeing. There is so much pent up demand, however, that these homes will be very tough for buyers to get. They will sell quickly, and many buyers are not looking at the value they are getting, and the unwary will probably overpay for this bunch. Things hopefully will smooth out by April, and I'm hopeful by May a lot of the steam will come out and we can have a productive late spring. It is certainly possible it all happens a month later, or even two months later, but I'm pretty sure May will be quite busy. Sellers would be wise to target earlier - not later - and buyers should be patient in the early go. Which will be really hard! But they should.