As we close out the year 2020, it’s easy to say that it was a year that defied expectations. The emergence of the pandemic early in the year created new realities that were unimaginable only a short time before. Most real estate insiders reforecasted for a year that would be marked by 10%-15% declines in the overall market. However, it also was right at this time that we saw the real estate community and the market do some amazing things.
First, the real estate market was not frozen during shelter-in-place orders. In fact, real estate activity in the weeks from late March to early May was far better than most expected. Innovative use of technology and the creativity of sellers, buyers and realtors alike resulted in market activity of about 60% compared to the same time frame a year earlier.
Next, home values did not decline. In fact, they continued their upward march and did so robustly. As we approach year-end, it appears the overall West Michigan market will see an increase in average sale price of about 8% this year.
Finally, with a return to safe, in-person real estate activity beginning in early May, the market entered a phase of breakneck-paced activity. Not only did activity bounce back to trend lines of the previous year, but it exceeded the pace for sales in each month since the May 7 lift. This increased activity means the market will finish the year with more transactions in 2020 than in 2019. That’s quite a feat under the circumstances.
What will this mean as we head into 2021? We anticipate that our market will remain strong even as it continues to be shaped by the circumstances surrounding COVID-19. Here are three reasons we believe that the impacts of COVID-19 actually will further bolster the West Michigan housing market.
Work freedom. Employers and employees alike have discovered that we can now accomplish the majority of our work from anywhere. For some, that means a greater desire for a second home. For others, it means moving a greater distance from one’s workplace altogether. In both cases, midsize markets like those that make up West Michigan stand to gain. We’ll continue to see migration from major metro areas into West Michigan as people seek out greater affordability and retreat.
Interest rates. We came into the pandemic with low interest rates, and the economic uncertainty that COVID-19 continues to generate will almost certainly hold rates at near historic lows. The purchasing power that low rates create will mean that 2021 will continue to be a good time for buyers to purchase. That demand will keep driving activity in our local markets.
Renewed appreciation for home. We’ve all spent more time at home. We’ve used our homes as classrooms and workplaces. We’ve turned to home as a place of sanctuary. We anticipate these trends carrying on to some extent in 2021 and beyond. The result is that we’ve come to expect more of our homes and learned to appreciate home all the more. Necessity and renewed appreciation will mean that homeowners continue to buy and sell to have these needs met by their home. Home offices and extra spaces will be renewed trends in 2021.
For these reasons and more, we forecast another positive year for residential real estate in West Michigan. Even as we collectively work through COVID-19 and its health and economic impacts, real estate will shine as a bright spot again in 2021 and help lead us through these uncertain times with confidence in our West Michigan housing market.