Housing Market Forecast 2021

Housing Market Forecast 2021

Housing Market Forecast 2021

The US housing market had a great year in 2020, and the circumstances ahead should make the forecast for year 2021 an amazing one.

With low inventory, delayed construction, latent buyers ready to pounce, and a cash rich buyer pool, a 20% year over year price growth rate by May isn’t outlandish.  We’re in the worst part of the season, and October’s sales continue strong.

Corelogic is forecasting a price growth of 1.2% by end of 2021. That would only happen in a deep recession and in fact, when the vaccinations begin, the euphoria will send the markets soaring against a housing supply crisis.

Housing sales grew again in October by 4.1% and more first time buyers have joined the fray.  Homes priced at above $1 million have doubled since 12 months ago. Now with mortgage rates low and Joe Biden unable to raise taxes (Republicans win the Senat), there might be little to stop the market from running hot in 2021.

 

Housing Market Prediction 2021: further 5% growth in sales and a 20% growth in prices by end of 2021.  This growth continues despite high unemployment and shutdown businesses.  News of the Covid 19 vaccines is raising optimism that the China curse will end within 6 to 8 months.

The top question for homebuyers from California to New York and Florida to Texas is whether to buy a home in the next 6 months 2021, and how to find one in the right price range.

October’s Stats Below

The outlook for the market is a very hot topic. October’s home sales and prices below show continued strong market strength as so many Americans are eager to own a home of their how. And with stimulus payments ahead in the winter, that would brighten the market considerably.

Supply constraints continue to hold the market back. The markets need some good news from the new construction industry.

October home sales

Home Sales and Prices. Screenshot courtesy of NAR.

 

Young buyers in particular, are eager to purchase a home yet the pandemic surge, unemployment and economic insecurity is making this a risky option. Consumer confidence is down a little.

Others have done well in the stock market, have cash saved, and are ready to buy if the right house is available.

 

Many Americans were relieved to see President Trump lose the election, but now are feeling some remorse as the Joe Biden policies darken the longer term future.

Home Buying Spree Continues

Will pessimism stop the home buying spree? No, not likely. The other trends below are far more influential of the 2021 housing market. For investors, housing prices are rising, rents are rising, and rental payment rates are staying steady.

If a new stimulus deal is agreed upon in January, it should provide a substantial boost to home buying. With only the Covid 19 vaccinations to go, there’s not much friction left to launch substantial home building in earnest next summer. Homebuilder confidence will rocket in the spring.

The forecast for the housing market in 2021 is for continued low mortgage rates, an improving economy, political dysfunction, and for reduced listings and rising house prices. Need to sell your house? 59% of Zillow respondents believe now is the right time to sell, and get a fantastic offer. 60% believe it’s a good time to buy.

You can check out forecasts, outlooks, and predictions for prices, sales, new construction, and mortgage rates and more below.

Looking Ahead t0 2021

The 2021 housing market prediction is complicated by the coming political battles in Washington. It appears US international trade will resume which is good for the short term, but perhaps not for the longer term.

You would be wise to buy a home and pay your mortgage off quickly. Find the lowest mortgage rate and launch your new life with no regrets wherever you’re headed.

Since the Republicans will control the Senate, the Democrats won’t be able to implement many of the economy killing policies they intended such as higher taxes, zero tariffs, higher energy prices, and open borders.

It’s optimistic that 2nd half 2021 will in fact be boom times. Rebounds from recessions are often strong.

And if inflation should heat up, with higher mortgage rates, higher home prices, higher building costs, and land costs, then buying soon makes a lot of sense. You’ll be building equity quickly. The exodus of Americans from the cities to the suburbs and rural regions may not subside. Remote work is a cost-saving feature for businesses and it allows companies to retain key talent who want to leave the Bay Area, Manhattan, Seattle, Boston and other such cities.

This means buyers should be considering buying in small towns, particularly in the midwest or south where prices are affordable. Big cities such as Washington DC, Manhattan, Miami and the SF Bay Area will see condo and apartment prices slide. In some of these cities such as Chicago, Manhattan, Queens, Philadelphia, Atlanta and Washington, neighborhoods could deteriorate because the tax base has eroded.

Cities in Colorado, Utah, Florida, North Carolina, Idaho, Montana, Pennsylvania, New Hampshire, should see good demand through 2021.

 

Where to Buy Your Next Home?

Where would you move to if you could? A lot of people feel it’s a good time to move to another city. Disease, strife, taxes and crime are emptying the inner cities across America. In their wake is the dread of bankruptcies, poor city services, disease, crime, poverty, unemployment, drug problems and malaise.

Police officers for instance are quitting their jobs in Philadelphia, Los Angeles, Minneapolis, Seattle, Houston, New York City, Boston and San Diego to be freed of the new political environments. And wealthy people are fleeing urban zones, even leaving the country. The flight from Manhattan and San Francisco is frightening.

They’re looking for a safer more pleasant existence in cities such as Denver, Austin, San Antonio, Salt Lake City, Nashville, Charlotte, and a host of other best cities to buy real estate. Some will escape to Costa Rica, Mexico, Canada, Australia, and the Caribbean.

Are you satisfied with your life in Chicago, Boston, San Francisco, Miami, Houston, Los Angeles, New York, Philadelphia, Atlanta or Seattle? Many aren’t which is why house prices are rocketing in medium-sized to small towns. You can see the list below.

US October Housing Report

Infographic Courtesy of NAR

As predicted, the housing market continued its spectacular recovery into the fall months.

Home sales rose for yet another month during October to a rate of 6.85 million units – + 4.3% from September and up an astonishing 26.6% from last October 2019.

The new median existing-home price was $313,000, almost 16% more than in October 2019 yet down from $316,200 in September.

Total housing inventory fell from September and from one year ago as well, to 1.42 million homes for sale, only 2.5 months supply which is a record low supply.

Total existing-home sales (single-family homes, townhomes, condominiums and co-ops), rose 4.3% from September’s numbers to a seasonally-adjusted annual rate of 6.85 million in October.  That sales level was up 26.6% from a year ago.

Single-family home sales rose 4.1% to 5.88 million units and that was a rise of almost 27%  from last October. The median existing single-family home price sold for an average $317,700 in October, up 16.0% from last year.

Condominium and co-op sales rose 5.8% over September to 730,000 units in October which is up almost 26% from last year. The median price for a condo sold in October was $273,600 up 10.3% from last October.

New home sales also increased in August by 4.8% to 1.01 million units, according to HUD and the U.S. Census Bureau. The August new home sales rate is a whopping 43.2% higher than the August 2019 pace.

See all the housing charts below.

Regional Home Sales Across the US

In the US Northeast, home sales climbed 4.7%, to 900,000 units which were up 30.4% YoY. The $356,500 price tag was up 20.2% from October 2019.

Out in the Midwest, home sales lept 8.6% to an annual rate of 1,640,000 in October (+28.1% YoY). The median home prices rose 16.7% YoY to $243,500.

Existing-home sales in the South grew 3.2% (2.91 million sales in October) which is up 26.5% from the same month last year. The median price jumped 15.7% in the South to $272,500.

And in the US Western states, home sales rose slightly by 1.4% to an annual rate of 1,400,000 in October (+22.8% YoY). The median price for an existing home sold in the West was $467,800, (+15.1%).

The outlook for home sales and prices in November and December is up and listings may dwindle faster than expected.  Some might see it as a bubble leading to a market crash however those buying homes right now tend to be wealthier and less vulnerable to a market disaster.

Screenshot courtesy of Nar.realtor.

NAR’s Housing Market Recovery Index rose 1.8 points last week reaching 110.4 nationwide.  This is almost 8 points above the pre-COVID baseline.  You can view recovery stats for each city on the NAR recovery webpage.  See all the stats and charts below from NAR, Statista, Yahoo, Census.gov, St Louis Fed, and other data sources.

Home sales continue to amaze, and there are plenty of buyers in the pipeline ready to enter the market,” “Further gains in sales are likely for the remainder of the year, with mortgage rates hovering around 3% and with continued job recovery.” said Lawrence Yun, NAR’s chief economist.

Considering the current state of the economy, these sales numbers make Realtors feel optimistic. The Realtor confidence index rose 5 more points to reach 76.  See the Florida, New York, and California housing market updates for more insight.

Existing Home Sales Rebound

September’s 6.54 million in sales has left the market with only 2.7 months of supply. The median sales price has risen a scary 14.8% year over year, while still in the grips of a national health pandemic.

US Housing Market — existing home sales October 2020. Screenshot courtesy of NAR.

US Housing Prices October 2020. Screenshot courtesy of NAR.

Lawrence Yun, NAR’s chief economist said “Home sales traditionally taper off toward the end of the year, but in September they surged beyond what we normally see during this season.  I would attribute this jump to record-low interest rates and an abundance of buyers in the marketplace, including buyers of vacation homes given the greater flexibility to work from home.”

YoY sales change. Screenshot courtesy of NAR

According to NAR/Centriloc surveys, home showings rose in all regions except the west.  Combine with pending sales data, foot traffic says a lot about where the housing market is headed.

See more on housing data for major metros including San Antonio, Austin, Colorado Springs, Salt Lake City,   DenverDallas, Houston, Manhattan, SeattleBostonNew York, Los Angeles, San Francisco, San Diego, Miami, Tampa, Atlanta, PhiladelphiaSacramento, MalibuChicago and Los Angeles.  Check the state outlooks for Illinois, New York, California and Florida.

 

Screenshot courtesy of NAR

Fewer Houses for Sale

Yes, despite the fragile condition of the recovering US economy and growing unemployment levels, the real estate market is in a whole other world, buoyed by low mortgage rates and high consumer saving rates.  The matter of fewer houses for sale and new construction not keeping paces will mean bubbling price levels.

It’s all fine unless something happens to the economy. Keep an eye on the stock market for future crash signals.

Low mortgage rates and limited inventory won’t be changing anytime soon, giving market pessimists little fuel for their housing market crash scenarios.

First time buyers accounted for 32% of purchases, up 1%. Rising prices and lower affordably priced homes should see less first time buyers participating in the housing market in the next 3 months.

Screenshot courtesy of Nar.realtor.

Distressed Home Sales

Doomsday sayers suggest a foreclosure boom on TV, however distressed sales (foreclosures and short sales) made up fewer than 1% of sales in September, same as August and down from 2% in September 2019.

Homeowners are becoming more equity rich.

Homes and Prices Rise

Single Family home sales rose 9.7% and are up 21.8% from one year ago.  The median price for a house for sale was $316,200 in September, (up 15.2% from September 2019). Condo prices rose 9.9% to $272,700 in September.  Condo, apartment and coop sales rose 29.4% from last month, a surprising statistic given the Covid 19 concerns.

The biggest surprise was the jump in sales in the Northeastern region. Existing-home sales in the Northeast grow a brisk 16.2% (860,000), which is up 23% from last September. The median home price in the Northeast rose 17.8% to $354,600,

The growing desire to migrate to suburban and rural areas could draw more home sellers into the real estate market. They’ll be using huge cash reserves, bit home equity, and perhaps money from the stock market. However, with cities to move to, it is difficult for homeowners to commit to selling.

 

Hottest Zip Codes: Home Price Rises and Views

NAR just released its list of hottest Zip Codes in the US. See also hottest housing market post.

Hottest Zip Codes in US. Screenshot courtesy of NAR.

Home Inventory dropping most severely in lower priced categories.

Screenshot courtesy of NAR

NAR Realtor Confidence

NAR Realtors® reported a continuing confidence in the housing market.  In September, the confidence index rose again to 75, up 4 points since June.  Realtors are reported level buyer traffic, slightly lower seller traffic, and that homes are sold much faster than last year. They expect a 2% price increase for the next 3 months compared to last year.

The RCI Seller Traffic Index fell one point to 44. The percent of Realtors surveyed who expect more buyer traffic in next 3 months fell from 48 to 44%. And the expected increase in seller traffic fell a few points to 22%  Realtors feel prices will cool off from their hot level, believing that home prices will only rise 1.3% to next September 2021.

Buyer traffic is reported as strong across most US states with most activity in South Carolina, West Virginia, New Jersey, Connecticut, North Dakota, Michigan, Montana, Vermont and Nebraska. Top selling activity states were North Dakota, Wyoming, Vermont,Nebraska, and Mississippi.

Screenshot courtesy of NAR

Housing Supply

Rocketing numbers of housing starts, but will it be enough to resolve demand?

Screenshot courtesy of NAR

New Home Sales Jump

Sales of new single-family houses in August 2020 climbed 4.8% to 1,011,000, up from July’s new new home sales of 965,000 homes, and up an astounding 43.2% from last August’s new construction sales total of 706,000.

The median sales price of new houses sold nationally in August rose to $312,800. The average sales price was $369,000.

New home sales are a leading indicator, and home buyer intent is rising.  Experts predict that we’re at the beginning of a cyclical upsurge (in the stock market too).

New Residential Sales. Screenshot courtesy of Census.gov

Screenshot courtesy of Tradingeconomics

Forecast is for Lower Mortgage Rates

Freddie Mac has some good news with mortgage rate forecast. Rates will decline. After the Feds injected $3 trillion into the economy, homebuyers are getting another boost in low mortgage rates. and a lot of debt and mortgage refinancing has been taking place.  Mortgage payments as a percent of income has risen.

Mortgage Rate Forecast to 2021. Screenshot courtesy of Freddie Mac.

 

Bottom line is that real estate is an even more precious asset which a decreasing number of buyers can afford.

 

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House Inventory by Price Range. Screenshot courtesy of NAR.

The New Mortgage Environment

Mortgage debt has fallen to the lowest level since 2003 according to the St. Louis Fed.

In a news release, the The Mortgage Bankers Association reports the total number of loans in forbearance fell by 23 basis points.  The rate fell from 7.44% of servicers’ portfolio volume in the prior week to 7.21% as of August 9, 2020.  3.6 million homeowners are in forbearance plans according to MBA.

Zillow reported that close to 4 million mortgages are in forbearance. 7.3% of all mortgagees couldn’t pay their mortgage. This could tighten up lending rules. Buyers may want to intensify their home search before that worsens.

Yahoo reports that mortgage refinancing has hit a 7 year high, as homeowners look to lower payments or get a grace period of some kind.

There are reports that mortgage rates might fall to a record low 3.1%. MBA says refinance loans rose 225% — which is three times the rate of one year ago.

 

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Now that business is reopening slowly, the market will have a little jump from latent demand and continue an upward trend in houses for sale too. The big worry is that we’ll see a second wave of Covid 19 infections. Let’s hope the government gets tough on hygiene, social distancing offenders, otherwise, given some people’s behavior, a second wave looks likely.

Although the stock markets have been trending up, unemployment and GDP drops are severe. The uncertainty of the Corona Virus period will suppress home sales. Higher unemployment, layoffs of high paid workers, and shut down of the travel industry are 3 key factors that will result in lower home and condo sales, and perhaps for the first time, lower home prices.

Many Americans will soon be on their own without Fed assistance and facing back rent and overdue mortgages. Cities such as Denver, Dallas, Houston, San Antonio, Austin, Salt Lake City, Las Vegas, Tulsa, Seattle, Boston, New York, New Jersey, Chicago , San Antonio, Austin, Colorado Springs, Salt Lake City, and Los Angeles may see some new home listings out of this distressed homeowner market, but not as much as some forecasters are predicting.

 

Housing Market Forecast: Looking for specific data related to the Dallas housing market, San Antonio, Austin, Salt Lake City, Los Angeles real estate market, New York real estate market forecast, Atlanta real estate marketSeattle real estate forecast, Chicago home sales projections, Philadelphia home sales report, San Diego County real estate update, Miami condo market, Boston housing market, Bay Area housing forecast, Tampa Sarasota housing outlookDenver housing outlook, and Houston housing market predictions?. See forecasts for California housing, and Florida housing markets.

 

Mortgage rates will fall as the Fed lowers the key rate which opens up big mortgages for Millennials buyers. NAR as part of its February housing market report said: According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage decreased to 3.47% in February.  This dropped from a 3.62% rate in January. The average commitment rate across all of 2019 was 3.94%.

The 5 to 10 year price forecast is upward reflecting a downward availability of homes and intense competition. And the 2021 housing forecast look solid. The question buyers have right now is whether the stock markets will hold up.  Jobless claims in California are scary, but the Covid 19 pandemic will pass.

NARs Realtor survey has been released. It’s got some good insight for buyers, sellers and Realtors alike.

Continue to US Housing Market Forecast Part 2

 

Bookmark this page and return for further forecasts, predictions and market data for most major US cities including  Los Angeles, New York City, San Diego, San Francisco, Houston, Miami, Dallas, Phoenix, Denver, Seattle, Chicago, Boston, Tampa, Austin, San Antonio, Salt Lake City, Charlotte, Orlando, Anaheim, Beverly Hills, Malibu,  San Jose, Fresno, Santa Clara, Mountainview, Palo Alto, Portland, PhiladelphiaSacramento, Washington, Atlanta, Irvine, Nashville, Sunnyvale, Riverside,  Oceanside, La Jolla, Carlsbad, Vista, Escondido, Raleigh, Albuquerque, Glendale, Long Beach, Huntington Beach, Carlsbad, Santa Clarita,  Henderson, and more. See Canadian city reports for Toronto, Vancouver, Montreal, Calgary, Newmarket/Aurora, Richmond Hill, Vaughan, and Mississauga.

 

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Housing Market Forecast – copyright Gord Collins

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There are 2 comments for this article
  1. Jeff Kirby at 5:17 pm

    Do you have a mailing list?If so I would like to include my e mail as I enjoyed all of your articles I just read.
    Many thanks
    Jeff Kirby

    • Gord Collins Author at 7:15 pm

      Hi Jeff, Thanks, that’s great to hear. I hope to produce many more, however I’m so busy I haven’t had the time to set up a newsletter or email list. Please bookmark though and looking forward to your feedback!

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