US Housing Market Sales & Price Forecast
For the 4th straight month, home sales have declined across the US, yet home prices continue to climb. The average listed price of a home on the MLS reached $380,000 in May.
While some are suggesting the housing market is in trouble and demand is about to flatten in 2022, the lack of supply is more likely the culprit now and causing continued steep price rises from Los Angeles to Miami to New York. Many consider 2022 the beginning of a 5 year period where moderation in prices will happen. That might be wishful thinking. See this deeper look into next year’s forecast.
May 2021 stats provided by NAR revealed:
- active listings have fallen 50.9% versus last year
- inventory of unsold homes, including pending listings has been reduced by 20.8%.
- new home listings have risen only 5.4% year over year
- newly listed homes now make up a whopping 44% of all home for sale on the MLS
- 523,000 fewer homes were up for sale on a typical day in May compared to the previous year.
- May’s median listing price for active listings was $380,000, up 15.2% compared to last year.
- homes were on the market for 39 days May, 32 days less than the same time last year.
As this graphic from Realtor.com depicts, the rate of price growth may be easing but it looks to be able to surpass $400,000 by August. Will buyers suddenly check out of the market as the economy fully reopens into a strong 2022 ahead?
While employment is slow to grow as progress out of the pandemic, wages are rising, and those who are employed will have more credibility and ability to buy a home. That should bolster demand for homes. As stimulus money begins to flow, it’s hard to imagine any scenario that would support lower home prices across the US.
Lawrence Yun, NAR’s chief economist said “We’ll see more inventory come to the market later this year as further COVID-19 vaccinations are administered and potential home sellers become more comfortable listing and showing their homes. The falling number of homeowners in mortgage forbearance will also bring about more inventory.“
Yun may be expecting growing sales in the next 6 months, but that limited number of houses will be sold at record prices. Home prices rose strongly in April as NAR reported the median existing-home sold price for all housing types in April rose 19.1% year over year to $341,600. Home prices reached a record high and this makes it 110 straight months of year-over-year gains.
Hottest Major Metros in May
Housing Inventory is Limited Going into Summer Season
Total housing inventory rose to 1.16 million homes, but still sit near record lows historically. That is up 10.5% from March’s inventory yet it’s 20.5% less than the 1.46 million homes available in April 2020. Home inventory rose slight to a 2.4-month supply, up from March’s 2.1-month supply yet still well down from the 4.0-month supply in April 2020.
During April 2021, homes were up for sale for an average 7 days, much less than the 18 days in March and 27 days back in April 2020. 88% of the homes sold in April 2021 were on the market for less than a month.
It’s almost hopeless for first time homebuyers given prices and down payments. Nearly half of homes sold to younger buyers are paid for by their parents, compared to 14% a few decades ago. The higher prices are drawing more people into debt.
April’s Housing Market Summary
Interested in your local real estate market? See the metro reports for Boston, Atlanta, New York, Philadelphia, Los Angeles, San Diego, Bay Area, Dallas, Denver, Houston, Chicago, and Miami. See also reports for smaller centers including Salt Lake City, Austin, Colorado Springs, San Antonio, Tampa, Seattle, and Manhattan.
Are you considering selling your home? See the post on selling for a higher price, . Realtors are you tired of so few seller leads? It’s time to step up to a more sustainable real estate marketing effort. See the Realtor marketing services, Realtor Websites, to generate more leads this year. Digital marketing is the route to market supremacy.
Single-Family and Condo Sales April
Single-family house sales fell to an annual rate of 5.13 million in April 2021. This is 3.2% less than the 5.30 million sales in March, yet is 28.9% more than one year ago. The median existing single-family home price was up 20.3% from last April at $347,400.
Existing condo and co-op property sales rose 1.4% from March 2021, and were up an surpirsing 84.6% from one year ago. It seems the post pandemic buying preference to the cities is happening. The median existing condo price rose 12.6% year over to $300,400 last month.
US Regional Home Sales
Not all regions had similar sales results.
Existing-home sales in the Northeast fell 3.9% in April from the previous month to an annualized rate of 730,000 which still up 30.4% leap from a year ago. The median home price in the Northeast rose 22% year over year to $381,100.
In the Midwest grew, home sales grew just 0.8% to an annual rate of 1,290,000 in April. The median home price in the Midwest has risen 13.5% to $259,300 in April 2021.
In the South, home sales fell 3.7%, at a clip of 2,600,000 units in April, and that is up 39.0% from the same time one year ago. The median home price in the South rose 15.8% year over year to $289,600.
And in the West, sales declined 3.1% from March to a new rate of of 1,230,000 in April. That is a big increase of 53.8% surge from 12 months previous. Home prices in the West are up 19.9% last month, year over year to $501,200.
More availability and at higher price points means sales in the luxury category has grown this year.
Cites with Highest Growth Rate
NAR has named 10 cities with the highest price growth rate. A friend of mine just moved to Coeur D’alene, Idaho and it’s completely understandable to make the change post pandemic to a city that beautiful.
Coeur d’Alene, Idaho
Median list price in March: $799,000
Median list price change: 82%
The other cities were:
- Santa Maria, CA (list price in March: $2.9 million, up 48%)
- East Stroudsburg, PA (list price in March: $285,000, up 43%)
- Billings, MT (list price in March: $428,500: up 41%)
- Boulder, CO (list price in March: $912,500: up 40%)
- Austin, TX (list price in March: $520,000: up 36%)
- Tupelo, MS (list price in March: $278,500: up 35%)
- Pittsfield, MA (list price in March: $581,500: up 33%)
- Bend, OR (list price in March: $589,450, up 33%)
- Sioux City, IA (list price in March: $274,950, up 32%)
What marks these amazing locations is how far they are from everything. The trend to the countryside has seized the US housing market. Buyers want bigger homes on bigger properties with fresh air and recreation close by.
Buyer’s will face bidding wars and higher home prices in their quest to buy a house. Smart sellers will be using strategy to sell their house for more. They want the best price. Buyers must use a better approach amidst the all cash bidding wars.
There will also be intense competition from investment buyers who see the capital gains and rental income benefits of housing stock too. They’re studying the best cities to buy homes. For those who instead may want to invest in real estate, there are offerings in the stock market (ETFs), to consider.
Real estate is the best investment — you can live in it or earn revenue renting part of it out to pay off your big mortgage.
As the stats below from NAR, Zillow and Redfin report, we’re still seeing strong sales and record high prices, and some recovery in urban markets curshed by the pandemic. Read more on the New York, Los Angeles, Bay Area, Miami, and Boston real estate markets.
US Housing Market Outlook
The US Housing Market & Forecast Report is the single most comprehensive view available on residential real estate in the US. You’ll find all the data, videos, charts, expert opinions and predictions vital to your decision to buy or sell a home this year.
You’ll find data and resources from NAR, Zillow, BEA, Mansion Global, CBO, Knoema, Freddie Mac, and other authoritative sources below in this extensive review of the US housing market and the new home construction market. See more on the spring housing market outlook, and 5 year forecast.
What Happened in April 2021?
Full housing market stats for April aren’t available yet (bookmark this page) however a new brief in April from NAR shows:
- median listing price of homes was up 15.2% year over year for the week of May 8, down 0.2%
- April national median listing price is $375,000, up 17.2% compared to last year.
- large US metros had price gains of 11.6% compared to last year.
- homes were up for sale 43 days in April which is 20 days less than the same time last year.
- New listings were up 5 percent, adding on to gains of 18 percent or more in each of the last 4 weeks.
- US inventory of active listings fell 53.0% over last year, while the total inventory of unsold homes, including pending listings, dropped 21.9%.
- new resale home listings rose 32.6% nationally versus last year and is up 43.0% for large metros over the past year.
- Austin (+40.6%), Los Angeles (+23.6%), and Riverside (+22.0%) saw the highest median list price growth in April
New home construction will rise, but material costs, labor, and interest rates will retard production, thus shortages will likely worsen as American’s begin spending in 2021. The key is that home sellers have nowwhere to go, and available housing is being bought up by real estate investors who see the potential of the house rental market.
Due to work from home freedoms, millions of prospective buyers will choose to rent, yet rent prices will be on the rise too. In the end, the housing shortage is about to touch almost everyone.
I like what Glenn Kelman CEO of Refin said in an interview with Emily Chang of Bloomberg that housing has been neglected and the bill for that has to be now. He says fewer people want to come back to the office and companies can’t push the market back to where it was pre-pandemic. People are happier after moving.
Yes, sales are up in the higher, more unaffordable levels which may be getting out of hand. There are more fears and predictions of a possible housing crash, but if the economy is going well, there will be no shortage of buyers. There are plenty of savings to support sales, but rising price will curtail activity.
Note: A record number of mortgages for second homes are being taken out, which further magnifies demand.
Please do share this post with others who might be considering buying or selling this year.
Recent, Up to Date Real Estate Stats!
Hopefully, this resource will save you time in understanding the residential real estate market and keeping up to date on supply and sales trends. See the stats and trends in your regional market: Los Angeles, San Diego, Denver, New York, Manhattan, Dallas, Boston, Philadelphia, Atlanta, San Francisco, Atlanta, Chicago, Austin, Houston, San Antonio, Salt Lake City, Tampa and Miami,
Housing Market Report Sections:
- Projections for Growth
- Optimism for 2021 and 2022 Forecast
- Should You Buy a House This Year?
- Is a Housing Market Crash Even Thinkable?
- 28 Key Factors Driving the Market
- Will the Recovery Add Fuel?
- Hottest State Housing Markets
- Predicting the Housing Market
- What’s Happened in the Housing Market in 2020?
- Who Are US Realtors
- How US Realtors Market Your Home
- Hottest Cities in the US
- Residential Real Estate Forecast & Predictions
- New Home Construction
- Housing Affordability
- Mortgage rates
- Mortgage Forbearance, Delinquency and Foreclosure Report
- The US Economy
- Realtor Housing Recovery Index
- Which Housing Markets Will Do Best in 2021?
- Will the Housing Boom Continue?
1. Projections for Growth
2020 was a record but strange year for sales and prices where the US market gained $2.5 trillion in value and grew $274 billion from new housing construction. It is now valued at $36.2 trillion.
Zillow forecasts that 2021 will be even better. And NAR too has a rosy forecast which you can read below.
2. Optimism for 2021 & 2022
A recent Reuter’s poll of nearly 40 housing analysts forecast the U.S. Case-Shiller house price index will rise 5.7% in 2021 and a further 4.6% in 2022, the highest forecast ever from the analysts.
The survey showed that as a group, they’re divided about the 2021 economy and housing sales outlook.
44% believe there will be a pullback while 56% believe it’s all systems go. They believe the economic recovery and homebuyer’s desire for more living space will drive the housing market this summer. As time passes, experts predictions become more positive for growth.
“The U.S. housing market will continue to expand this year, perhaps at a little slower rate than recently as some of the pent up demand has been exhausted, but overall it should be a fairly good year,” said Sal Guatieri, a senior economist at BMO Capital Markets. — from Reuters report on poll of housing experts.
“Two factors here: exceedingly easy monetary policy and changes in tastes and preferences away from crowded cities in favor of areas with lower population density. This will likely continue for all of 2021,” said Troy Ludtka, U.S. economist at Natixis. — from Reuters report on poll of housing experts.
Housing Market Forecast 2022
2022 will be a special, transitional year, out of the pandemic where the economy is fully back to normal. Several situations will make 2022 a stellar year in the US housing market including:
- stimulus spending by the US government
- recovering US and global economy
- un-satiated demand from Millennial and space seeking work from home buyers
- demand from investors for rental properties
- home builders able to increase new construction output
- inflation in 2021 starts easing in 2022 and mortgage rates may decline
Homebuyers are wondering if home prices might fall in 2022 and 2023. Not just a few buyers are hoping for a downturn or a recession to help out with their goal of buying a house.
Expert prognosticators in the industry only expect price rises to moderate next year, and not to head downward. As the previous graphic forecasted for 4.6% price growth.
U.S. house prices will continue to race ahead this year, at nearly twice the pace predicted just three months ago, according to a Reuters poll of analysts who said risks to that already upbeat outlook were skewed to the upside — from Reuters report.
3. Should You Buy a House This Year?
The big question a lot of homebuyers are asking right now is whether this is a wise time to buy a home? Should you wait until the Covid 19 variant threat is finally stopped? Will mortgage rates jump?
The best answer might be no. With prices this high, the risk of economic failure in 2023, including a potential stock market crash, you could lose the home you just bought. The current wave of euphoria is driven by a fear of missing out, and a poor understanding of what is to come in 2023 and the next 5 years.
Best advice for homebuyers might be to wait for a major real estate market downturn or even a crash. However, there is a risk of a major currency devaluation stemming from significant inflation and government debt. The crisis with the US border and with China trade will handcuff the Biden government. Biden’s plan to raise capital gains is pushing money out of the country and this will help ease demand for US housing. However, corporate buyers of homes for conversion to rentals is a significant trend that may not stop.
4. Is a Housing Market Crash Even Thinkable?
Anyone considering buying a home right now has to be aware of events that could lead to a housing market crash. At the very least, we’ll see a significant financial event within 5 years. Not this year or next though. The immediate outlook is too strong.
The run-up in home prices in the luxury, high-riced levels has been steep. This sector would crash first should Biden’s economic policies not work. Previous recessions were highlighted by steep oil prices. If the US stock market were to crash, the housing market may go with it. Few people see crashes coming, yet with prices so high amidst a weak economy dependent on Fed stimulus, while the trade deficit grows, you’ll hear many warnings online. It’s a good idea to review the crash factors and weigh against your own situation.
The uncertainty of Covid 19 variants is causing anxiety, however the trend seems to easing. The summer sun is not far away. Globally too, the infection rate is falling and vaccinations continue. This should ease restrictions on house hunting and of course, and seeing people return to work.
Each month, home prices grow amidst shrinking supply (except January) and many experts and buyers alike are asking how high this will go before prices either level off or collapse? Growing construction and a lower number of pandemic-related buyers are bound to take some of the steam out of home prices during the 2nd half, however the impact of new construction really won’t be felt until 2022.
Although Covid vaccinations are happening, it’s unlikely to stem the tide of buyers seeking single detached houses for some time yet. Low mortgage rates, rising employment, and growing millennial demand will maintain prices. The delay of the economic recovery further extends the delay of home construction yet makes Fed stimulus more likely. The danger to the markets is the end of the moratorium on mortgage payments and rent payments. Those debts keep mounting and represent future bankruptcies.
Much of the swell in demand in the last 12 months was from a select group of buyers, not from the unfortunate unemployed the media focus on. And as international buyers return to the bidding wars in 2021, the outlook for prices is a jump of 10% or even 15% more.
Let’s look at more statistics and influences on what is driving the buying decision. Because if the reasons people are buying are really strong, then sales and prices will rise even if the economy sags. And didn’t it do that in 2020?
4. 28 Key Factors Driving the Home Buy/Sell Decision this Spring
- strong economic recovery expected in 2nd half
- fear of missing out amidst record low housing supply
- millennials and even Gen Z’s forming new families and need a house
- homeowners have nowhere to go thus can’t sell
- home buyers want homes in more suburban and rural areas
- Americans who moved back to parents or with relatives will want their own place to live this year
- work from home expected to continue
- government will spend more stimulus money because they want to ensure the employment, stock market and housing markets don’t stagnate
- Fed promised to keep interest rates down
- supply of homes making it unlikely many will be able to buy
- new home construction, material and land prices rising faster
- foreclosures may free up some homes for sale
- migration: work from home still driving buyers out of the cities for more room for a home office, backyard, space to relax
- migration: businesses moving out of high tax states to lower-tax states
- inflation plus money supply plus need for housing could inflate house prices severely
- buyers holding high-value stock portfolio’s could sell to buy a home
- buyers see a house as a potential rental income property
- many sellers want to get out of the city they live in for something new after a horrible pandemic period
- real estate is a preferred asset when cash, savings, and stocks can only go down in value
- cities and regions will still not allow housing development (NIMBYs) thus more demand for the limited available stock of homes
- homes are a safe haven (those renting saw how insecure their week to week lifestyles are where they could be left with nothing later in life, and wondering whether social security will even over their bills)
- speculation (real estate investors including the new crowdfunding buyer who can take more risk don’t see a big downside to real estate and are willing to pump money in for houses or rental properties)
- as employment grows there will be more demand for homes in 2021, 2022 and for 5 years ahead
- states such as Texas, Florida, Arizona drawing new residents (climate, jobs, business growth, low taxes)
- Los Angeles, San Francisco, New York losing residents (cost of living, taxes, failing economies)
- global economic growth will hit 4% in 2021 (world bank report)
- 225,000–500,000 homeowners could face foreclosure this year
- homelessness in the major cities will become a negative factor driving people out of the cities and shunning buyers
5. Will the Recovering Economy Add Fuel to the Price Fire?
If home prices soared during a major recession wouldn’t further gains logically follow when the economy does a 180 turn? And these economic swings guarantee that the one side of a shift will equal the opposite side. We have volatility and speculation as a new normal making the house buying decision a difficult one.
Houses for sale this year will be significantly higher, and that’s because it takes time for markets to cool. With no big negative influences in sight (other than oil and energy shortages) there might not be anything to cause sudden drops.
And a K-shaped recovery doesn’t necessarily mean the lower wage earners won’t have the financial act together by 2022. There will be a lot of pain, but the odds of it affecting the single-detached home market is low.
Overall, economic growth is expected to be strong in the 2nd half, after vaccinations have been given to more than half of vulnerable Americans. Covid 19 could disappear, only kept alive by a few vaccine refusers who are so sparsely located that the disease isn’t transmitted much.
As businesses reopen, fed by 3 trillion dollars, and as international trade and tourism resumes, Americans and foreign visitors will be spending again. This economic resurgence won’t happen in a hurry, which helps to bring confidence to conservative investors and help to allay inflation.
The CBO expected economic growth, employment consumer spending to grow strongly in Q4 2020, but it didn’t due to continued shutdowns from the Corona Virus threat.
So latent demand will be further extended into 2nd half of 2020. Of course, we’ll still see record demand from homebuyers in this coming spring buying season. That will hit its peak in June and July as usual.
Of course, over the next year, new home construction will provide more supply and mitigate higher price pressures. And multifamily construction should begin rising in 2021.
6. Hottest State Housing Markets
According to our friends at Bankrate.com, here are the current rankings of each state’s housing market.
|Overall Ranking||State||Home Price Appreciation||Job Growth||Cost of Living Ranking||Tax Rank|
|50||District of Columbia||51||31||51||46|
7. Predicting the Housing Market
Even the top housing market experts can’t predict because the variables are unknowns – often political reactions. It’s going to come down to home buyers doing their homework about the housing market in their city or state and weighing the risk of buying in 2021.
The fact so many are hesitant due to the economic insecurity, might be the saving grace in easing a bubble condition. Because if buyers are certain, they will be bidding up high. The sales and price velocity are very high.
Some housing market and economic experts are talking about this year’s potential housing market boom while others are warning about a downturn this year. In this article, we take a closer look at housing statistics, opinions, and the trends or velocity of the market, as we move deeper into 2021 and onto 2022.
There are some strong demographic trends supporting brisk home construction, home sales, and mortgage buying. Add the pandemic work-from-home-migration trend and you have strong reasons to buy a house. There are renters who would do anything to move out of their tiny apartments to a bigger place with a walkable neighborhood.
And this is all taking place in an ultra-low mortgage rate period, with some homebuyers holding a lot of cash savings for a down payment.
8. What’s Happened in the Housing Market in 2021?
Median Home Price:
$334,500 sold price for single detached homes
Average Mortgage Rates
Down to 2.73%, for 30 year fixed rate from Freddie Mac
Total Homes Sold
842,000 existing homes sold in 2020
Total Housing Inventory
Declined by 23% in 2020 to 1.9 months supply which is a record low
Days on Market
DOM declined by 10 days to 76 days on average
9. Who Are US Realtors?
Just a quick diversion here to look at the professionals you may be hiring to sell your home or assist in buying a house.
REALTOR® Demographics 2021
65% percent of REALTORS® are licensed as sales agents, 22% hold broker licenses, while 15% have broker associate licenses.
64% of all REALTORS® are female , 55 years of age, who attended college and own a home.
Average experience of US REALTORS® is 9 years and have been with their current firm for only 4 years. They normally work about 36 hours per week, and earned a median gross income of $49,700 in 2019, up $8700 from 2018.
Realtors averaged about 12 transactions (sides) in 2019. Most Realtors are independent contractors with a very low number of homes to sell.
10. How Realtors Market Homes
Realtors are increasingly turning to online real estate marketing strategies to market client’s homes and build demand. From bidding wars to reaching homeowners willing to sell via predictive analytics tools, the modern real estate is very different from their forebears.
Here’s some facts you need to know about Realtors® in the US:
- Realtors® communicate with clients via email (93%), while 92% use SMS text messaging, and 37% use instant messaging (Facebook).
- 11% of REALTORS® under 49 years of age owned a real estate blog, and 76% of female REALTORS® and 73% of male REALTORS® use social media for communications and real estate marketing purposes.
- Agents believe their most valuable technology tools are: local MLS websites/apps (64%), lockbox/smart key devices (39%), and social media platforms (28%).
- The top 3 tech tools they believe bring them the best quality of home buyer and seller leads ares: social media (47%), MLS sites (32%), brokerage’s website (29%) and listing aggregator sites (29%).
- 48% of real estate brokerages and companies believe that keeping pace with new technology as the most formidable challenge they face in 2021 and 2022. Of course, finding seller leads is easily the toughest challenge and then closing a sale with them.
On the other home buyers they serve tend to about 47 years of age, are 31% first time buyers who are typically 33 years old. They have a median household income of $106,700 and typically buy a home built in 1993 with 3 bedrooms and 2 bathrooms.
Homebuyers typically finance 88% of the home price and buy or sell using a Realtor, whom they would recommend to others.
Homebuyers found their home via:
⦁ Internet: 52%
⦁ Real estate agent: 29%
⦁ Yard sign/open house sign: 6%
⦁ Friend, relative, or neighbor: 5%
⦁ Home builder or their agent: 6%
⦁ Directly from sellers: 2%
⦁ Newspaper ad: 1%
The typical home seller in 2017 was 56 years of age, had a median household income of $107,100, and had lived in their home for a decade. 89% of sellers used a real estate agent to sell their home and they typically received 99% of the listing price, after the home sat on the market for 21 days.
Recent sellers typically sold their homes for 99% of the listing price, and 38% reported reducing the asking price at least once.
The typical home sold was on the market for 3 weeks. 41% of sellers found a real estate agent through a referral by friends or family, and 26% used the agent they previously worked with to buy or sell a home.
Most homebuyers shop for homes online however, and public interest in in-person open houses is43% lower than a year earlier. Realtors will be doing more real estate marketing online.
11. Hottest City Housing Markets United States
|City||Nielson Hotness Rank||NAR Hotness Rank||NAR hotness rank change M/M||NAR Hotness Rank Y/Y||
Median List Price
|Battle Creek, mi||298||154||-18||-79||$156,000|
|La Crosse-Onalaska, wi-mn||293||74||3||16||$272,500|
|Yuba City, ca||291||13||17||2||$445,000|
|The Villages, fl||288||142||14||-136||$315,000|
|Wichita falls, tx||286||66||40||-3||$140,000|
|Elizabethtown-Fort Knox, ky||283||57||-34||100||$210,000|
|Jefferson City, mo||281||54||-36||77||$178,000|
12. Residential Real Estate Forecast & Predictions
Home Sales Forecast
Realtor.com forecasts home sales will rise 7% in 2021.
Home Price Forecast
Realtor.com forecasts a price rise of 5.7% in 2021.
Home Supply Forecast
“Buyers may finally have a better selection of homes to choose from later in the year, but will face a renewed challenge of affordability as prices stay high and mortgage rates rise,” said Danielle Hale, realtor.com’s chief economist.
New Home Sales
According to a new report in Yahoo Finance, new housing construction fell more than expected in January. There is a surge in future construction permits, yet December’s and January’s construction lull could contribute to higher home prices in 2021. Low mortgage rates, millennial housing demand, and a surging economy will push spring housing home prices up.
New home construction starts decreased 6.0% to a new annual rate of 1.580 million units last month. This drop is much more than economists had forecast (1.658 million units in January). Homebuilding overall fell 2.3% compared to January of 2020.
New Home Construction
An estimated 1,390,300 housing units were started in 2020. Privately-owned housing starts in December rose 5.8% to 1,669,000. This is 5.2 more than December of 2019. Building permits issued in December rose 4.5% in December to 1,709,000. That was 17.3 % higher than December 1,457,000 housing permits issued.
Single Family Home Construction
Single-family homebuilding declined 12.2% to a seasonally adjusted annual rate of 1.162 million units after eight straight months of gains. Single-family building permits jumped 3.8% to a rate of 1.269 million units in January.
Multifamily home construction surged (up 17.1%) to a 418,000 units in January. Building permits for multi-family housing projects soared 27.2% to a pace of 612,000 units.
“Demand conditions remain solid due to demographics, low mortgage rates and the suburban shift to lower cost markets, but we expect to see some cooling in growth rates for residential construction in 2021 due to cost factors, supply chain issues and regulatory risks,” said NAHB Chief Economist Robert Dietz. “Some builders are at capacity and may not be able to expand production due to these headwinds.” from Nahbnow.com February report on homebuilder confidence.
Homebuilder sentiment (HMI index) is up to 90, but the 6 month outlook has it sinking toward 80.
Chicago-based building products company AZEK has seen amazing sales growth in its residential business, which accounted for about 87% of total revenues. The company reported $212.3 million of sales, up from $166 million last year. Azek reported $10 million in earnings for the quarter and its stock price has risen 23% so far this year.
“The focus on the house really gives us a long-term benefit because we really benefit from people investing in their homes said CEO Jesse Singh who is bullish on the long-term outlook (interview with Jim Cramer of Madmoney).
13. Housing Affordability
What is hampering housing affordability is competition and rocketing prices, housing development regulations, lack of developable land, lack of builder subsidies, stagnant wages and high unemployment, and rising building materials and labor costs. Government regulation and NIMBYism are overpowering the market’s opportunity to create more housing hence we can expect higher home prices.
Rising inflation and interest rates could be the key factor affecting housing affordability in the next 3 years.
14. Mortgage Rates
The rate for a 30 year fixed rate mortgage has reached an amazing low of 2.7 to 2.8% of recent according to this chart below courtesy of NerdWallet and Zillow. NAR expects the 30-year fixed rate mortgage to average 3% in 2021 as the economy improves and investors look for higher returns than the 10-year T-note yield. Mortgage applications rose 7% in February.
30 Year Fixed Rate Mortgage Rate
15. Mortgage Payments
According to the February NAR report, the monthly mortgage payment on a typical existing single-family home rose to $1,040 (1126 in February which is still lower than the average rent price of $1166 per month.
On average, families typically spent 14.8% of their income on mortgage payments based on a median family income of $84,313 in the 4th quarter 2020. That’s down .1% from last year. The family income needed to by a house is now $49,908 (up $1000 from last year).
16. Mortgage Forbearance, Delinquency and Foreclosure Report
Black Knight reported that almost 3.6 million 90-day defaults occurred in 2020 – the largest number since 2009. 2.1 million homeowners are currently seriously delinquent on their mortgage payments, and with 600,000 forbearance plans expiring in March, it will create 1.5 million more serious delinquencies than at the start of the pandemic. As of last month, there were above 2.7 million homeowners in active forbearance plans. 12% of borrowers are now in forbearance.
The good news is that home foreclosures hit an all-time low in January. ATTOM Data Solutions January 2021 U.S. Foreclosure Market Report showed a total of 9,702 U.S. properties had foreclosure filings — default notices, scheduled auctions or bank repossessions. It is 11% down from a month ago and down 80% from 12 months ago.
The bad news is that this is due to President Biden’s foreclosure moratorium on repossessions of homes on government-backed mortgages. the fear is that when it ends in March, there will be little to prevent foreclosures.
The World Property Journal reports that US lenders repossessed 1,428 U.S. properties in January 2021, which was 28% lower than December 2020. It was also 86% less than last year.
Those states with an annual decrease in REOs in January 2021 included: Illinois (-86%); Florida (-83%); Maryland (-83%); California (-82%); and Texas (-82%).
17. The US Economy
There are plenty of varying forecasts and predictions for the 2021 US economy. Most outlooks are optimistic after a disastrous 2020.
The Conference Board has this to say about the US economic forecast:
The Conference Board forecasts that US Real GDP growth will rise by 2.0 percent (annualized rate) in 1Q21 and 4.4 percent (year-over-year) in 2021.* Following a lull in the economic recovery in recent months, we expect the pace of the rebound to reaccelerate as new COVID-19 infection rates decline, the vaccination program expands, and the prospects of another large fiscal support program improve. We expect the recovery to continue into next year and forecast growth of 3.1 percent (year-over-year) in 2022.
BEA reported that the U.S. international trade deficit increased in 2020 from $576.9 billion in 2019 to $678.7 billion in 2020 As a percentage of U.S. gross domestic product, the goods and services deficit rose .5% from 2.7% 2019 to 3.2 percent in 2020. The goods deficit increased from $864.3 billion in 2019 to $915.8 billion in 2020. The services surplus decreased from $287.5 billion in 2019 to $237.1 billion in 2020.
BEA reports that Real GDP fell 3.5% in 2020 vs 2019. It had increased 2.2 percent in 2019. Real (GDP) grew 4.0 percent in the fourth quarter of 2020 according to the “advance” estimate released by the Bureau of Economic Analysis. 3rd quarter of 2020 had a rebounding 33.4 growth, in comparison with the Q2 shutdown period.
The Fed believes more harm would result with low inflation rather than higher inflation. The expected inflation rate for 2021 is 2.2%.
18. Realtor Housing Recovery Index
The realtor recovery index grew strongly beginning in May, but as the reality of the fight with Covid 19 has worn on, confidence in the recovery has waned. Those lofty expectations were perhaps a little rosy but as summer 2021 approaches it will rise again.
For the week ending February 6, 2021, the realtor.com Housing Market Recovery Index reached 101.5 nationwide, down 2.7 points over last week. The New Supply Growth Index declined by 7.9 points from the prior week which means home sellers are pulling back. That means how sellers perceive their own future affects whether they will list.
As the economy lifts, and prices rise, we’ll see many more homes come on the market, which should help to moderate price increases. The housing demand component decreased slightly to 118.7 this past week, down 2.2 points over last week.
The pace of sales held well above the pre-COVID baseline at 110.0, and was .3 points higher than the previous week. 31 of the 50 largest markets had growth in asking prices.
19. Which Housing Markets Will Do Best in 2021?
NAR believes these 10 housing markets will enjoy the best sales and price growth this year.
All markets, including Los Angeles, San Diego, Denver, New York, Manhattan, Dallas, Boston, Philadelphia, Atlanta, Chicago, Austin, San Antonio, Salt Lake City, Tampa and Miami, have felt the crush of demand and much higher home prices. Florida is booming while California’s housing market is hurting.
Whether it’s a good time to buy a home might depend on who you are and why you’re buying. For renters stuck with high rents and zero equity going forward, anytime is a good time. Overall, the HPSI is rising again a grim economic performance in December. Buyers sentiment is down significantly from just one year ago. As the pandemic eases, we could see the index rise slowly back to previous levels around 90.
22. Will the Housing Boom Continue?
If the economy recovers, we know demand for homes and condos will improve too. There are strong fundamental drivers of housing demand as noted earlier, and even high bubble-like prices might not deter home buyers in 2021 and 2022.
“Home sales could possibly reach 8 million if we had more inventory,” said Lawrence Yun, chief economist for the Realtors. “Mortgage rates should remain very low throughout 2021, although we may have seen the lowest already.”
It’s unlikely we’ll experience a housing market crash in the next two years, but we can’t completely discount one. More likely is the Biden admin won’t medal with something so fragile while the economy is rebounding.
Sources, Citations & References and further reading:
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