Hottest Housing Markets 2021 We know there’s big changes…
Will House and Condo Prices Fall?
2021 is becoming a year of ultra-heated home price gains, and buyers are feeling the pain, and many will give up on their quest to find a house for sale.
Homeowners on the other hand are enjoying the fantastic prices buyers are paying. They’re wondering too whether prices could suddenly fall, as often housing bubbles suddenly burst. They’re all asking the question: “should I sell my house now.”
Home construction is picking up strongly in the spring as weather improves and as workers return from Covid 19 shutdowns. As home construction releases pick up, it likely won’t satisfy demand as the economy is recovering. Buyers will be more confident of their ability to pay their mortgages. Buyers are looking everywhere for a house which has pushed ex-urb home prices skyward.
Sadly, for homebuyers, the year over year price gains are painful to see. Yet, upper level income earners are a lot more optimistic about their own possibilities to buy a home. It might be short lived however, since high end home prices are the fast growing.
Housing Starts from Census.gov
Privately-owned home construction starts in March rose to annual rate of 1,739,000, 19.4% from February’s estimate of 1,457,000 new units. This is 37% above the March 2020 rate of 1,269,000.
Permits for privately-owned housing units in March were at a seasonally rose 2.7% to 1,766,000 units above the revised February rate of 1,720,000. This is 30.2 percent above the March 2020 rate of 1,356,000 units. Single-family authorizations in March rose 4.6% to 1,199,000 units, 4.6% above the revised February figure of 1,146,000.
The work from home revolution is feeding demand outside of major cities and this trend will wane a little but still be a major trend. It will broaden demand across all states, particularly the heartland states. Texas will thrive with growing tech company arrivals and a rising price of oil.
Prices are predicated by supply vs demand, and supply is still constrained, with worker shortage and material cost rises adding to supply woes in 2021.
Pandemic Adds Stimulus But Delays House Construction
But we’re not out of the pandemic just yet. Only a third of Americans have had their vaccination shots. Up in Canada, a very small portion of Canadians have received theirs and they’re suffering a vicious rise in Covid variant infections. Many US states are seeing a growth in variants too. However as vaccinations improve, we could see an improvement in conditions over the summer months. It will be a drain on the recovery and home sales.
There’s little doubt many hopeful buyers hope there is going to be a housing market crash. Some believe the stock market also may go into a high speed wobble as inflation heats up and prices go ballistic. Home prices won’t fall anytime soon. There are too many buyers awash with cash who know real estate is a good hedge against inflation and mortgage rates are super low. The Fed has no intention of raising rates.
And property investors, small and corporate are buying up real estate for the income potential, particularly single detached houses.
Why will home prices fall? See factors below.
There is optimism in the industry (perhaps only me now) but it’s not based on current numbers, more on the the 5 year market forecast. The economy will regain its footing this summer.
Could This Fall Become A Housing Market Crash?
Home prices recorded an annual increase of 10% last month according to Corelogic, and NAR has higher numbers. This is the highest since 2006, and we know what happened in 2007. The crash was a shock to individual homeowners and to investors who lost billions in that recession.
Some are concerned less about home prices receding, and more on the possibility of a housing market crash. If it is the housing crash many are praying for, then they’ll likely pick up a home for much less, if their investments hold up and they keep their jobs.
The cities most likely to crash are at much higher risk. Will home prices go down in the Bay Area housing market, Boston, New York, Atlanta, Philadelphia, Miami, New Orleans, Tampa, Phoenix, Chicago, Seattle, Sacramento, Malibu, Dallas, Houston, Austin, Fort Worth, Denver, and San Diego?
Are house prices falling up in Toronto, Montreal, Calgary and Vancouver? Corona Virus and falling energy prices are decimating Canada right now. Home prices are falling and will likely follow the same path as US cities.
California and Other Tech Sectors
The tech sector seems to be more resilient so that market is likely safe despite its ridiculously high prices. At watch for falling home and condo prices too is New York City. The shutdown there may be prolonged due to the severe Covid 19 outbreak and overwhelm of its its medical system.
A lot of wealth has been removed because little work has been done. Some estimates are that the US GDP will drop by 25% this quarter. Will the stimulus money be enough to keep the economy moving for several months? Likely not, so it’s important that companies begin work again as soon as possible.
The President’s 2 Trillion dollar stimulus bills has passed and the stock markets responded well this week. The US has the highest number of confirmed Corona Virus cases. Now the spring break beach scenes are starting to haunt a lot of people.
The state of Florida showed up red on the health warning website healthweather.us. The readings have dropped recently, however New York is rated in the normal range despite the fact NYC is in a Covid 19 outbreak.
How Far Will Home Prices Drop?
The data isn’t in, but many Realtors are reporting an almost 100% drop in in-person showings. The Dallas Morning News reported a 60% drop in Realtor showings. Who would show their home during a pandemic outbreak?
“We aren’t just facing an economic recession, we are facing an economic standstill,” said Robert Reffkin of Compass Realty.
Many have reverted to video and other online real estate presentation sites. Others have just given up until the Corona Virus shutdown ends.
But will buyers be in the market after a period of unemployment and concerns about their financial situation for the rest of 2020. And Millennial buyers may stay put in their apartment rentals because the status quo is safer. They may even be on the hunt for cheaper apartment prices. Will apartment rent prices go down? The rent market is much more resistant to falling rent prices, but landlords are likely to see falling occupancy rates.
Why Could Housing Prices go Down?
- home prices unaffordable — buyers lose interest
- stock market has a major correction or crash and retail investors take a big loss
- Biden’s tax hike doesn’t go well with investors and they hide their money and don’t invest
- trade deficit with China becoming so painful a trade war begins
- oil prices rocket higher
- Fed raises rates after promising not to
- cost of living shoots skyward
- inflation gets seriously out of hand
- government makes policy changes to restrict demand creating unnatural and unpredictable effects
- move to cryptocurrency threatens the US dollar and the Euro causing banks and governments to lose control and fail
Prices May not Fall Until 2023
2023 is the year beyond most economists forecast and beyond politicians big stimulus payouts.
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