Home sales are recovering from the setback of the coronavirus led crisis with fall becoming the peak homebuying season. The trade war with China threatened international trade, creating a cloud that deferred business investment. Now we need to wait and watch whether the demand would soften up a bit more in November & December and lead to a decrease in the pace of price growth. If the unemployment rate increases, it has a direct impact on vacancy rates, just as what happened this year since March. Lower mortgage costs and median income rises are the two important factors that make housing relatively more affordable. In addition to the sellers’ market pressures, in which homes sell quickly after listing, measured time on market is also dropping as the share of fresh listings rises. Sellers continue to be cautious, and further improvement could be constrained by lingering coronavirus concerns and economic uncertainty. If you qualify for a mortgage, you have a more limited selection and prices close to what they were before the coronavirus hit, but you have relatively little competition. Both prices and sales have been surging month-over-month breaking new records. The sellers are enjoying the fastest listing price growth recorded in more than two years. Future sources of economic uncertainty, including lapsed fiscal relief, the long-term fate of policies supporting the rental and mortgage market, and virus-specific factors, were incorporated into this outlook. Rents are falling across most major cities, such as San Francisco, CA (-20.7%); Oakland, CA (-19.2%); New York City, NY (-15.0%); Seattle, WA (-14.9%); Washington DC (-14.8%); San Jose, CA (-13.5%); Los Angeles, CA (-13.0%); Boston, MA (-12.6%); Denver, CO (-12.5%); Irving, TX (-10.7%); Wichita, KS (-10.4%); Corpus Christi, TX (-8.9%); and Plano, TX (-8.4%)., forcing landlords to offer incentives to attract tenants after an exodus from urban areas. Still, the early rebound "indicates the housing market may be equipped to lead the broader economy through the recovery." As a result, this is an indicator that things are heading towards a balanced real estate market. Home prices are holding up to the decline in transaction activity. Further improvement in the pace of sales remains highly dependent on each local housing market’s ability to contain COVID-19 and weather the economic impact. Still, the overall amount remains high. Up to 3.4% by year end Builder sentiment is at an all-time high and building permits have rebounded from pandemic lows. According to the U.S. Bureau of Labor Statistics, as of July, the U.S. unemployment rate stood at 10.2 percent. https://www.enterprisebank.com/insights/construction-industry-suppliers-pace-covid19-impact In other words, homes are selling faster. Borrowers can request an additional six months if needed. The price of the typical home for sale remains unchanged at $350,000. That’s not all. In response to the COVID-19 national emergency, borrowers with financial hardship due to the pandemic have been able to receive forbearance, which is a pause or reduction in their monthly mortgage payment. We cannot expect the new listings to improve under such conditions. In the week ending October 17, there were 37% fewer homes on the market than there were in the same week last year, according to Zillow Economic Research, and the average purchase loan size that was applied for last week was $372,600 – a new all-time high. All Rights Reserved. Homebuilders were already prioritizing luxury homes over affordable and/or starter homes. is October 22. The moratorium is expected to cost the two government-sponsored enterprises between $1.1 billion and $1.7 billion, and it protects more than 28 million homeowners across the country. Grand Rapids Housing Market Forecast 2019 – 2021. It also shows the strength of the recovery since the beginning of May. That is why home sales are expected to be around six million in 2021 instead of the previously projected 6.3 million. There was a shortage of affordable housing, driving up the cost of the homes Millennials can afford. The foreclosure moratorium applies to Enterprise-backed, single-family mortgages only while the REO eviction moratorium applies to properties that are acquired by Fannie or Freddie through foreclosure or deed-in-lieu of foreclosure transactions. That may contribute to a decline in sale prices, but it presents an excellent buying opportunity. The Atlanta housing market is expected to see one of the country's steepest rises in home prices next year, according to the 2021 housing forecast from realtor.com. That’s compared to the original housing market forecast of a decline of 1.8 percent in home sales. On the other hand, in a market in which there's a scarcity of vacant homes or apartments, the power dynamic is reversed. Year over year, the HPSI is still down 10.5 points but it has recovered more than half of the early pandemic-period decline, mirroring the strong home purchase activity of the past few months. The 1-bedroom median and 2-bedroom median were down 15.0% and 17.1% from last year, respectively. Los Angeles (+16.9%), Philadelphia (+16.7%), and Cincinnati (16.3%) posted the highest year-over-year median list price growth in October. Affordability was already a problem for the US housing market before the coronavirus hit. 2021 housing market forecast: It’s about politics, not economics Financial protections set to expire during split congress November 23, 2020, 4:54 pm By Ralph McLaughlin Norada Real Estate Investments However, industry experts are seeing more positive conditions in many suburban markets. Oakland 1 and 2-bedroom medians decreased by 19.2% and 12.3%, respectively. Mortgage rates and slow but steady improvements to the job landscape continue to propel confidence for first-time buyers. If the current rate of progress continues, more than a million loans will be behind on payments when forbearance programs begin to expire in March 2021. After rising to 5.3% y/y in the third quarter, growth will slow to 2.0% y/y by the end of next year. Under normal market conditions, prices would be expected to skyrocket as inventory declines at a faster rate, but buyer demand is expected to see-saw as the fourth wave of coronavirus pandemic pop-ups in winters. Boston, MA: 1-bedroom median price was down 3.9% from the month prior to $2210. Mortgage rates for housing are anticipated to stay at near 3% over the next 18 months which will keep things easier for buyers. The payment deferral option allows borrowers, who can return to making their normal monthly mortgage payment, the ability to repay their missed payments at the time the home is sold, refinanced, or at maturity. Personal saving was $2.78 trillion in the third quarter, compared with $4.71 trillion in the second quarter. This is good news for real estate investors looking to buy a rental property in a strong housing market. https://www.realtor.com/research/2020-housing-market-predictions-covid-19-update/ Three of four regional indices recorded decreases in contract activity on a month-over-month basis in September. The post The Housing Market Could Fall Very, Very Sharply by 2021! Up to 3.4% by year end Existing Home Median Price Appreciation +5.7%. The major effect will be seen in the summer of 2021 because foreclosure that starts today is probably not going to be processed until mid of 2021. We could easily see the housing affordability index hit 200. To afford a typical mortgage payment, a given family needs to spend no more than 25% of income on its mortgage payment (for a 30-year fixed-rate mortgage with a 20% down payment). The official unemployment rate jumping ten percentage points or more means many people are out of work. Realtor.com's latest national housing report shows that it is an unusually active buying season where homes sold more quickly in October than September. The growth of new listings has begun to decline in November which further impacts the total inventory. An April Realtor.com survey found out that after spending many long weeks confined in their homes, consumers’ preferences shifted toward bigger homes and more outdoor space for their next homes. Record ow mortgage rates have boosted demand for new homes. The economic fallout of the coronavirus is probably going to make housing less affordable, not more so. Another factor affecting this equation is the rising average price of new homes. https://www.nar.realtor/research-and-statistics/housing-statistics/ Homebuyer interest has surpassed expectations post-pandemic and it continues to outpace last year’s levels over the last few months. What will 2020 & 2021 be like for sellers? According to Zillow's, seasonally adjusted home values would increase by 2.9% between September and the end of 2020, and rise 7% in the 12 months ending September 2021. So after May 1st, that index started to go up, it passed 85 in mid-May and then continue to work its way up rather quickly. If this trend remains steady in the weeks ahead, that points to a seasonal slowdown, but if the time on the market shrinks by a greater amount, that’s a signal that 2020's housing market is going to remain hot even during holidays. As discussed above, home sales are constrained by low inventory and diminished seller and buyer confidence as the effects of COVID linger in the labor market. Social-distancing requirements are also likely to hold construction back in the coming months. Those interested in purchasing homes are looking at the enticing low mortgage rates. All 50 of the nation’s largest metros saw year-over-year gains in median listing prices in October. The NAR may have missed the big picture: With inflation possible,... https://www.youtube.com/watch?v=_yGVUcC_P-k&t=29s, https://www.youtube.com/watch?v=8ss6WfHqqgg, 9% believe a recession will occur this year. The housing market 2020 was running at a record pace in the early stages of the coronavirus outbreak in February 2020, with sellers continuing to gain leverage, and buyers benefit from lower mortgage rates. For the first time since the pandemic began, all four major components of real estate activity—the demand, supply, pricing, and sales—are growing above the pre-COVID pace. Unsold inventory sits at a 2.7-month supply at the current sales pace, down from 3.0 months in August and down from the 4.0-month figure recorded in September 2019. While pending contracts are at an all-time high, that will not necessarily translate to a record number of home sales because not all contracts lead to closings and due to sampling size variations. According to the U.S. Census Bureau, the homeowner vacancy rate in 2019 was 1.3%, and the rental vacancy rate at approximately 6.8%. Economic and Strategic Research (ESR) Group, 50-year low average mortgage rate of 3.15%, San Francisco Bay Area Real Estate Market & Investment 2021, California Real Estate Market: Prices | Trends | Forecast 2021, Las Vegas Real Estate Market: Prices | Trends | Forecast 2021. It had crossed the January baseline for the first time since early August. The decrease in government spending was in federal as well as state and local governments. With unusually high buyer interest this late in the homebuying season, buyers continue to move much faster than this time last year to beat out competition and lock in low mortgage rates. A failure of new listings to improve beyond the current pace could prove to be an obstacle for further sales improvements, given their strong correlation with sales. The share of home buyers looking at suburban markets near large cities and even across state lines is showing a rebound, as consumers look to a post-pandemic landscape, with cities in the Southeast seeing renewed interest. Buyers were expected to continue to move to affordability, benefiting smaller and mid-sized markets. The most recovered markets for home-buying interest include Buffalo; Baltimore; Sacramento; Washington, DC; and San Antonio, with a housing demand growth index between 122 and 127. With today’s mortgage rates at historic lows, you can refinance your mortgage to lower your monthly payments and improve your financial situation. Last modified March 20, 2019, Your email address will not be published. New single-family construction starts will fall slightly to 871,250 in 2020 before rising to 940,000 in 2021 and 975,000 in 2022, the highest level since 2006. The Cares Act Mortgage Forbearance: Right For You? Hays Regional Economic Outlook Conference Presentation "2021 Kansas Housing Markets Forecast" - October 22, 2020. The housing market predictions were pointing out that all the housing indices would trend upward for the nation as a whole as well as in every state, including the top 100 metro areas. U.S. rental payment rates appear to be staying afloat. If this Housing Market Forecast of Grand Rapids is correct, home prices will be higher in the 3rd Quarter of 2019 than they were in the 3rd Quarter of 2018. A reading over 50 indicates that more builders view sales conditions as good compared with those who view them as poor. It forecasts the UK housing market and economy to make some gains and stabilise by the end of 2021. The median listing price in the hottest zip codes was $335,000, up 1.8 percent year-over-year. The Northeast (107.6), Midwest (105.7), and South (104.8) also remain above recovery pace. Three of the six HPSI components increased month over month, with consumers reporting a substantially more optimistic view of home-selling conditions, expected home price growth, and the labor market, but a more pessimistic view of homebuying conditions and mortgage rate expectations. The National Multifamily Housing Council found 94.6 percent of apartment households made a full or partial rent payment by October 27 in its survey of 11.4 million units of professionally managed apartment units across the country. Instead, you should make the decision to buy a home based on your economic situation. The housing market is well past the recovery phase and is now booming with higher home sales compared to the pre-pandemic period. The home price forecast has been adjusted to higher for 2021. Housing is affordable when the housing of an acceptable minimum standard can be obtained and retained leaving sufficient income to meet essential non-housing expenditure. First-time buyers were responsible for 31% of sales in September, down from 33% in both August 2020 and September 2019. Sales volumes overall are forecasted to remain higher than pre-pandemic levels throughout this year and next. ... Video of Dr. Longhofer's presentation on the 2021 Wichita Housing Forecast on October 20, 2020. With 10 years having now passed since the Great Recession, the U.S. has been on the longest period of continued economic expansion on record. https://www.cnbc.com/2020/03/19/coronavirus-update-home-sales-could-fall-by-35percent-as-spring-market-stalls.html To put it simply, the US housing market is ripe for investment in 2020, making it a great time to buy a rental property for sale to increase your cash flow. Fannie Mae is assuming that the spike in unemployment will drag on the housing market for the entire year. Due to this persistent shortage of housing, some experts predict that the median home price for the country as a whole could easily rise by 10% cumulatively over the next two years. Their forecast suggests that closed home sales reached a recent high in September, and will temporarily slow down in the coming months, falling to pre-pandemic levels by January 2021. New York, NY: 1-bedroom median price dropped 1.9% from the month prior to $2550, and the 2-bedroom median decreased 3.0% to $2900. This suggests that the normal seasonal slowdown in buying activity may finally be taking place in winters. With 10 years having now passed since the Great Recession, the U.S. has been on the longest period of continued economic expansion on record. A seller would always prefer sales to a list price ratio of 100% or more. In the third quarter, the percent of homeowners and renters behind on their payments fell slightly from the prior quarter. All of this adds up to tens of millions of households seeing their income drop, many of them substantially. Everything depends on how much longer the nation must deal with the coronavirus pandemic and how quickly the economy is able to recover from the blow. Capital Economics’ recent housing market predictions are that new and existing home sales will fall back over the remainder of the year. U.S. housing market expansion to continue in 2021, Realtor economist forecasts The median house price will rise 3% in 2021 and sales will jump 9% … Home sales generally pick up in the spring-summer season. That’s about four times the number of average weekly applicants before the pandemic. Months of double-digit price growth and record level inventory may finally be translating into buyer fatigue. It remains above the pre-COVID baseline. While for someone looking to buy a home and then immediately flip it seems a bit difficult because it’s not clear where real-estate prices will go. NAHB noted that a shift toward suburban areas working in tandem with incredibly low-interest rates has kept builders busy. Properties typically remained on the market for 21 days in September – an all-time low – seasonally down from 22 days in August and down from 32 days in September 2019. Let us discuss in detail the various housing indices & their predictions for 2020 & 2021. Sales of new single-family houses in September 2020 were at a seasonally adjusted annual rate of 959,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. At the same time, it is important to note that mortgage delinquencies and foreclosures increased in August and October, respectively. The rental vacancy rates in the Midwest and South were higher than the rate in the West, and there was not a significant difference between the rates in the Midwest and South. That will help take some of the heat out of the housing market and soften the price growth. Home prices across Canada could tumble about seven per cent in 2021, as unemployment dampens the hot real estate market, according to a forecast by Moody's Analytics, Inc. As was expected, home buying and selling prospects drastically improved in October 2020 from pandemic lows. The NAHB/Wells Fargo Housing Market Index (HMI) index is designed to measure sentiment for the U.S. single-family housing market and is a widely watched gauge of the outlook for the U.S. housing sector. Current-dollar personal income decreased $540.6 billion in the third quarter, in contrast to an increase of $1.45 trillion in the second quarter. With the supply of available homes continuing to balance, and the entry-level demand is expected to remain strong. As of now record-low mortgage rates and shortage of inventory are keeping the US housing market strong with respect to buyer demand. It will be well into 2021 before you will see a spike in single-family and condo foreclosures. These local housing supply trends show that sellers were returning faster in the more expensive housing markets. Usually larger metro areas have an advantage when it comes to rental properties. The HMI index gauging current sales conditions rose two points to 90, the component measuring sales expectations in the next six months increased three points to 88, and the measure charting traffic of prospective buyers held steady at 74. Number of First-Time Home Buyers Growing in USA, 3 Reasons Why Now Is The Right Time to Sell, The Biggest Mistake Millenials Are Making, How to Increase Your Equity Over the Next 5 Years, Remember These 3 Critical House Hunting Tips. This would be the lowest rate since 1991. His mission is to help 1 million people create wealth and passive income and put them on the path to financial freedom with real estate. If the reopening is followed by another wave of the COVID pandemic leading to a shutdown, the “double-dip” is a possible result (W-shaped recovery). Therefore, low-income households spending a high proportion of their income on housing may and vice versa. https://www.marketplace.org/2020/03/24/covid-19-nurses-doctors-licenses-states/ However, we may see home sales temper toward the latter part of 2020 and into 2021 if the unemployment rate stays elevated, but slower home sales are different than a busted housing bubble. The housing index is pegged to a starting point of 100 at a particular year. If you're wondering what the state of the housing market will be like over the next six months, especially if you're an investor, then here is some good news for you. The 30-year fixed-rate averaged 3.57% in the first quarter of 2020, down from 4.62% one year ago. The current 30-year fixed-rate is averaged 3.15%. The average monthly mortgage payment on a 30-year fixed-rate mortgage with a 20% down payment was $995, down from $1,048 a year ago. And over the long run, if an extended period of low-interest rates supports economic growth, that could lead to further drops in unemployment, which in turn could help disadvantaged workers who are typically the last to benefit from a long economic expansion. In the third quarter of 2020, the rental vacancy rate was the highest in Metropolitan Statistical Areas (7.5) percent. Buyers of apartment properties are returning to the market, spurred by historically low-interest rates and increased equity financing availability. The housing supply index, which measures the growth of new listings, also fell for the second week in a row, to 95.9, down 2.7 points over the prior week. The millions of student debt borrowers behind on their payments also have future ramifications for the housing markets. The previous forecast predicted a 3.8% increase in home prices over this time frame. However, the housing market forecast should not affect your decision to buy a home. Seasonally adjusted home prices are expected to increase by 1.2% from August to November and rise 4.8% between August 2020 and August 2021. But knowing that the Fed’s benchmark rate is likely to stay at its current level of near zero for a long time — analysts say that could be several years — might give companies more confidence to invest and hire. All of this shows that with the opening of up U.S economy, the key housing indicators have begun to turn around. The standard deviation of median 1-bedroom prices in the top 100 cities has decreased by 19% from a year ago. In the Midwest, the index slid 3.2% to 120.5 last month, up 18.5% from September 2019. The decline came as Americans turned their attention to the 2020 elections. We can expect home builders to focus their limited manpower and resources on luxury homes that will sell for more. Among these 50 largest metros, the time a typical property spends on the market has improved at similar rates across all four regions. The current trend gives no relief to buyers because it would not slow down the price growth. Approximately 89.9 percent of the housing units in the United States in the third quarter of 2020 were occupied and 10.1 percent were vacant. Housing Crash Coming? These improvements in the labor market reflected the continued resumption of economic activity that had been curtailed in March and April due to the coronavirus (COVID-19) pandemic. The pandemic led to record-high prices, short supply, and economic uncertainty but despite all of that the buyer demand remained very strong. Despite the four weekly declines, application activity pertaining to home purchase mortgage loans remains near its highest level in the last 12 years and 24% above last year’s levels. In the second quarter, GDP decreased 32.8 percent, or $2.04 trillion (tables 1 and 3). Although growth in supply remains below the normal seasonal pace it continues to improve as buyers anxiously await more sellers to put fresh new homes for sale on the market. Sellers returned to the market, as the decline in newly listed properties substantially improved and western and northeastern metros saw more newly listed homes than the same time the previous year. However, we won’t speculate much about it and would rather focus on the current housing indicators and their recovery from the lows caused by the pandemic. It is currently 13.3 points above the January baseline. For comparison, roughly 5.3 million homes sold in 2019. The national median family income for the United States for FY 2020 is $78,500, an increase of almost four percent over the national median family income in FY 2019, according to U. S. Department of Housing and Urban Development. An additional 22% selected 2021, and smaller camps predicted the next recession would arrive the following year, in 2022 or at some unspecified later date. What will 2021 be like for investors? Current economic conditions resemble a “swoosh” pattern, with the initial impact from the lockdown followed by a gradual recovery as the economy reopens. Improving but continued lack of newly listed homes on the market is driving inventory to all-time lows and continues to push prices up higher into double-digit growth territory for the first time since 2017. Housing Market Forecast 2021 //Here are my FIVE housing market predictions for 2021. According to economists and market watchers, the real estate sector has also been highly supportive of the economic recovery of the country so far. On the other hand, the homeownership rate of 67.4 percent was 2.6 percentage points higher than the rate in the third quarter 2019 (64.8 percent) and not statistically different from the rate in the second quarter 2020 (67.9 percent). As of November 7th, it is now 8.0 points above the pre-COVID baseline but a decrease of 1.4 points over the prior week. In a sign that housing continues to lead the economy forward, builder confidence (NAHB/Wells Fargo HMI index) in the market for newly-built single-family homes continues to increase. Zillow's market pulse report dated October 28, 2020, also shows regaining of buyer confidence with a modest weekly improvement in mortgage applications. The increase in consumer spending reflected increases in services (led by health care) and goods (led by motor vehicles and parts). https://www.investopedia.com/terms/a/affordability-index.asp Before the coronavirus pandemic began, the U.S. housing market was already short from the supply side. According to the National Association of Realtors®, overall sales decreased year-over-year, down 17.2% (4.33 million units in April 2020) from a year ago (5.23 million in April 2019). Realtor.com's forecast and housing market predictions on key trends that will shape the year ahead. Continue Reading Show full articles without "Continue Reading" button for {0} hours. Housing Market Forecast 2021: Signs of Crashing Next Year? Meanwhile, the research suggests that the second quarter of 2021 could see a fall in house prices, assuming that the stamp duty holiday ends in March. 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