- Part I of two-part series on housing market forecasts from real estate experts, economists, association professional and investors
- Part I features experts with com, National Association of Home Builders, Better.com, ATTOM Data Solutions, CoreLogic and Zonda
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The 2020 housing market is closing out the year with record-low mortgage rates, record-low inventory, record-high home prices pumped by nearly frenetic competition, and sizzling hot sales numbers spurred by soaring demand and a wave of relocations due to pandemic-inspired remote working.
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Let’s take our final look at real estate experts’ expectations of the 2021 housing market in Parts I & II of this two-part series:
Danielle Hale – Chief Economist with realtor.com
Hale expects strong demand and low mortgage rates to continue into the 2021 housing market. She predicts sales and prices to increase on top of 2020’s surprisingly high levels, +7% and +5.7% respectively. A gradually recovering economy, likely midyear, will push a slight uptick to still low mortgage rates. Trailing inventory will keep sales and prices growing but at slower clips than 2020. First-time buyers without existing home equity, most often Millennials and Gen-Zers, will have a tougher time coming up with down payments as home prices and mortgage interest rates gradually increase.
Overall, Hale believes the 2020 seller’s market will continue into 2021 while new home starts increase +9% on top of increasing starts in 2020. And, by near the end of 2021, she anticipates that more existing homeowners will come into the market as sellers, thus offering buyers more choices in a growing inventory .
Robert Dietz – Senior Vice President with National Association of Home Builders
For single-family homes, Dietz expects to see gradually increasing growth building upon nearly record high confidence levels of home buildings and the gains in construction made in 2020. Growing sales in new construction will continue in pending starts as Millennials and Gen Zers continue wanting to live in lower-density markets. Higher building material costs, longer delivery time and insufficient labor supplies will continue to bog down both builders and consumers.
Dietz believes remodeling demand will remain strong and likely increase. Multi-family construction in high-density markets may pause as existing apartment buildings struggle to recoup tenancy as renters remain pandemic-shy of living in close quarters.
Elana Knoller – Chief Product Officer with Better.com
The COVID-19 pandemic was a game-changer for technology utilization by many transaction specialists within the housing industry and with homeowners alike. Rather than what some called a trend, Knoller sees tech applications only expanding to multiple aspects of the housing industry as a norm among all housing professionals and savvy consumers who want to live more and more conveniently with tech-enabled homes.
Knoll sees existing owners who haven’t yet refinanced their mortgages to do so early in the year to take advantage of the low interest environment that could inch up mid-year as the COVID vaccination rate becomes more available and the economy begins to recover.
Todd Teta – Chief Product Officer with ATTOM Data Solutions
Teta bases his crystal ball gazing into 2021 on the following statistics and assumptions:
- L-shaped supply with under 500,000 homes on the market or a nearly -50% drop in 2020 from 2019
- Q3 2020’s highest loan volume in 13 years will endure into 2021 with continuing high demand for mortgage refinancing to take advantage of low interest rates
- Teta believes GSE conservatorship will remain under the incoming Biden-Harris administration
- Eviction moratoria will extend through Q2 2021 with an uptick likely at the end of the year and into 2022
- As in 2020, the home flipping rate will continue to be down due to continued rising prices
- Consumer demand will remain strong but could be deferred until first-time buyer tax credits promised by Biden administration become effective
Selma Hepp – Deputy Chief Economist with CoreLogic
Pointing to demographics, Hepp predicts that continued low mortgage rates will help ameliorate continued rising home prices in 2021 for first-time buyers and serial buyers who want to upsize and/or trade-up. She reminds us that the largest percentage of Millennials will be turning 30 in 2021, the prime household formation year. Also, the oldest Millennials are becoming trade-up buyers. Bottom line – Hepp believes sales activity will outpace 2020 levels.
Hepp predicts there will be some improvement on the inventory front, partially from new construction and partially from distressed owners, but that the imbalance between supply and demand will continue to press, though more slowly, completion and home price appreciation.
Ali Wolfe – Chief Economist with Zonda
Despite the housing industry and online retail sales having “Super V-shaped” economic recoveries in 2020, Zonda believes it may take between 1.4 and 3.3 years for the economy to fully recover. (With new jobs being added at the rate of 610,000, Zonda gets to a recovery time of 1.4 years; with new jobs being recovered at the present rate of 245,000, a full recovery would take until 3.3 years for a full recovery. However, and this is a big however, Zonda reminds us that historically, the GDP and spending come back into the economy before jobs are recovered.
Regardless of the state of the economy, Wolfe predicts that housing will continue on its 2020 rapid and universal upward trajectory. The magic of mortgage rates has and will continue to “turn back” time at all price points. The 60% of consumers who have been saving during COVID-stimulated lockdowns and uncertainties want to continue saving and want to buy a home with their essentially COVID-enabled savings for a down payment.
Wolfe encourages housing professionals and consumers to watch for five key things when focusing on the new housing sector:
- Building material costs
- Building material availability
- New home affordability
- Land prices
- Lot availability
Thanks to Fortune and Zonda.
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