US Housing Market Forecast
It’s been 3 straight months of growth in resale home sales nationally across the US. With interest rates low and Covid 19 fading with the booster shots, 2022 is looking like a great year. A lot of people will be trying to buy a home.
NAR reports that in November, home sales rose 1.9% vs the previous month to a seasonally adjusted annual rate of 6.46 million units. That sales rate wasn’t seen since last January when the market was uncharacteristically hot. It may be that December, January and February may see brisk sales too.
And the median price of a resale home rose 13.9% from 12 months ago to $353,900. YoY, the inventory of unsold homes fell 13.3% to 1.1 million units which is only 2.1 months supply.
Lawrence Yun believes supply and labor shortage are responsible for a lack of new inventory and feeding the issues. However, the US market is severely short of homes and demand will grow in 2022 as the economy recovers. On a good note, new home construction was up in November. Please do read the stock market forecast and stock market news report for further economic and financial signals.
Enjoy this epic report on the US housing market and forecast. You’ll find commentary from experts and stats from major providers including NAR, Forisk, US Census Bureau, NAHB, Zillow, Realtor.com, St Louis fed, Statista, Fannie Mae, Fred, Nerdwallet, and more. Please bookmark and share on social media.
New Home Construction Outlook
With economic cooling, interest rate and mortgage rate rises are less pressing and that could cool some of the desperate buyer demand. New home construction permits rose and they’re up considerably from last year. It’s a good trend yet is hardly enough to satisfy demand. Housing experts (Redfin) see much moderation in the market , however there are hundreds of thousands of potential buyers still eager to buy a home.
What increased home sales highlights about the US housing market is the underlying demand for single detached homes. While there are fears of a housing market correction and crippling interest rate rises, those higher rates may not show up until 2023 and even then may not be significant. Rising rates before an election is unlikely.
The demand for housing is driven by young millennials and even Gen Xers who are still borrowing from their parents to buy. They’ve been more active due to work from home jobs. But these generations have less faith in society and are feeling worse about spending money on rent and thus not their own wealth.
No break in the upward trajectory of house prices yet condos saw a sudden downturn. Could be the Omicron virus is causing buyers to delay buying in the multifamily/condo market.
Home Prices Rising
The median price of a single-family home price rose 14.9% to $362,600 in November, vs November 2020. The median condo price also rose 4.4% YoY to $283,200 in Novembe.
Single-family home sales rose to a seasonally adjusted annual rate of 5.75 million in November, up 1.6% from 5.66 million in October and down 2.2% from one year ago.
Existing condominium and co-op sales were recorded at a seasonally adjusted annual rate of 710,000 units in November, up 4.4% from 680,000 in October and equal to one year ago.
As we know, we’re not through the Covid pandemic as yet and it has hampered home and condo construction efforts, raised costs, and negatively affected employment rates. Despite that, Americans have a lot of cash, low debt, and good credit. Still, most are straining to compete to buy when other buyers are offering all cash offers and prices are at record levels.
Will the housing market cool off? It would have cooled off already if it was going to. Only new construction can help meet the overwhelming demand for homes right now.
The median home price is up 13.9% to $353,900 and this is the 117th straight month that home prices have gone up in year-over-year gains. See more on the Los Angeles, Bay Area, San Diego, Dallas, Denver, Austin, New York, Boston, Chicago, Philadelphia, Atlanta and Miami real estate markets. Check the state stats for California, Florida, and Illinois.
Cash buyers seem to be the force in the market, although online real estate house buyers seem to be on the decline. By spring however, we might a resurgence as it become obvious home prices will rise over the summer selling season.
With respect to home building, home builders feel optimistic about 2022 however a lack of serviceable lots and construction workers will hamper production. According to NAHB, 76% of builders believe supply of developed lots in their regions was low to very low. This means the gains from low resale home supply, higher demand, buyer readiness, low interest rates, and the economic recovery might be lost.
“In addition to well publicized concerns over building materials and the national supply chain, labor and building lot access are key constraints for housing supply,” “Lot availability is at multi-decade lows and the construction industry currently has more than 330,000 open positions. said NAHB Chief Economist Robert Dietz.
Home Sales by Price Range
Home sales in the luxury price category continue to sell well, while sales in the lower affordable range have struggled due a lack of inventory.
People still ask if home prices and rent prices will fall are likely to be continually disappointed. With shortages and an improving economy amidst record low mortgage rates, the forecast for continuing rising prices, especially for renters since homebuyers will be forced to rent a home, until inventory grows.
Zillow Home Prices
Zilllow is still bullish on the housing market even though it has curtailed its ibuyer home buying department. They see home prices rising another 14.3% after a 19+ rise in the previous 12 months. That gives credence to a housing market forecast of rising prices and thinning supply.
With rising taxes, fewer building incentives, more development regulations, higher materials and labor costs, rising price predictions are a no-brainer. Persistent demands for housing by young adults starting families, and an apartment market that is severely constrained will increase the demand for housing. Young buyers are borrowing much larger amounts now from their parents, so they keep jumping over hurdles the government is imposing to discourage buying.
These key charts show home prices rising even as mortgage payments rise.
Many consider 2022 the beginning of a 5 year period where moderation in prices will happen just as sales have begun to slump. Yet sales and prices don’t always correlate. Instead the prediction for sales and prices will continue to diverge, until the economy fully reopens. That will enable new construction, and give homeowners the confidence to sell their homes at a very attractive price. With nowhere to go and economic uncertainty with Covid fears, the real estate market forecast remains subdued, at least for this year. 2022 is a different story.
Buyers and sellers are nervous about the Housing Market.
Please do share this post generously, so they can make good choices!
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. Given the intensity of buyers, you may be considering whether to sell your home fast. See the post on iBuyers.
Stats for Major US Metros
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.
US Regional Home Sales
Sales of existing-home sales in the Northeast region stayed consistent with Octobers number at an annual rate of 760,000. That was a rise of 11.6% from November 2020. The median price of home in the Northeast went up 4.7% YoY to $372,500.
In the Midwest, home sales rose 0.7% from October to an annual rate of 1,520,000 in November. That was down .7% from 12 months ago. Median home prices in the Midwest jumped 9% to $260,100 year over year.
In the South, home sales grew 2.9% to a new annual rate of 2,850,000. This was 1.1% higher than last November. Home prices in the South have jumped 18.4% from one year ago to $318,900.
Sales of resale homes in the West grew 2.3%, to a new annual rate of 1,330,000 in November. And that is down 3.6% from last November. Price in the West rose 8.4% to $507,200, up 8.4% last month.
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 crushed by the pandemic. Read more on the New York, Los Angeles, Bay Area, Miami, and Boston real estate markets.
US Housing Market Forecast
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.
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 nowhere 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.
Glenn Kelman CEO of Redfin 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 and they want to work at their house for many reasons. Work is changing the US housing market.
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 US Property Market
- What’s Happened in the Housing Market in 2021?
- 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 Metros 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, 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 current government. Their 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 the current US administration’s economic policies not work. 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 jobs 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.
6. Hottest State Housing Markets
According to our friends at Bankrate.com, here are the current rankings of each state’s situation.
|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 property 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 economists and economic experts are talking about this year’s potential residential real estate 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. While you can sell your home fast now, having a Realtor able to help you sell it for more may be a better option.
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 is 56 years of age, has a median household income of $107,100, and has 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 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
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
Privately-owned housing starts in July 2021 grew 7% to a new annual rate of 1,534,000 below the June 2021 estimate of 1,650,000 starts.
The National Association of Home Builders offered an optimistic look on the new home construction market in July. NAHB says single-family and multifamily starts were 9.3% higher in the Northeast, 5.9% higher in the Midwest, 5.2% higher in the South and 1.4% higher in the West.
Overall new home permits rose 18.8% to a 1.50 million unit annualized rate in July. Single-family house permits increased 17.0% to a 983,000 unit rate and multifamily permits rocketed 22.5% to a annualized 512,000 pace.
Screenshot courtesy of NAR
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. Political disruption about actually ruin the market, perhaps even pushing us into a housing market crash.
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.
30 Year Fixed Rate Mortgage Rate
15. Mortgage Rates and Payments
According to Freddie Mac, In August, the average rate for a 30-year, conventional, fixed-rate mortgage was 2.84% which was down from 2.87% in July. The average rate in 2020 was 3.11%.
According to Freddie Mac, the 30-year fixed mortgage rate dropped to 2.86% from 2.88% from the previous week. NAR believes mortgage rates to inch higher, to perhaps 3.5% by mid-2022 as the Fed moves forward with tapering.
The typical US monthly mortgage payment on a single-family home is up to $1,215 and the household income required to be able to buy a house increased to $58,314. In 17 major cities, buyers need a $100,000 down payment on a purchase.
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 the President’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.”
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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, Salt Lake City, an Los Angeles may see some new home listings out of this distressed homeowner market, but not as much as some forecasters are predicting.