What a difference a pandemic like Covid makes in the housing market! Let's take a look at the most recent housing market trends and forecasts for 2021 & 2022. We'll go over the current overall real estate trends, price and rent increases, housing sales and supply, and mortgage rates and delinquencies, as well as other key industry takeaways and insights into the US housing market. This year has seen an extraordinarily strong real estate market, with strong housing demand in practically every part of the country.
The Covid-caused crisis has so far unfolded in the opposite direction of what one would predict in a recession. The improved economy and millennials entering their peak homebuying years are fueling a residential housing boom. Low mortgage rates, combined with an increase in working from home as a result of the pandemic, have spurred a surge in housing demand, particularly in lower-density suburbs. In 2020, more existing homes were sold than in any other year since 2006.
In a competitive housing market, hyperactive buyers are driving up home prices and leading homes to sell quickly. Despite growing home prices at the fastest rate on record, the Federal Reserve continues to support the housing industry by buying $40 billion in mortgage bonds every month. The housing market is still far from normal, with inventories down over 38% year over year and at historic lows.
The current supply of homes on the market is at an all-time low, dating back to the turn of the century. Due to a lack of supply and decreasing interest rates or borrowing costs, home prices have continued to rise in double digits. With the recovering economy, more buyers are entering the market. And, because there is still a limited supply of housing inventory, home prices could climb even more in a low-interest-rate scenario.
The average prices of single-family houses with mortgages guaranteed by Fannie Mae and Freddie Mac advanced 1.4 percent from a month earlier in March 2021, the most since last October and following an upwardly revised 1.1 percent growth in February. Such home price gains are expected again until either supply ramps up or demand eases. The differences between today's frenetic housing market and last year's frozen market are quite significant.
According to Realtor.com, the typical home asking price hit another new high in May 2021 by reaching $380,000, an increase of 15.2% compared to last year. While home prices never fell, they were flat this time last year. However, the pace of home price appreciation has slowed from last month by 2 percentage points. Relief is not yet on the horizon for homebuyers as inventory continues to shrink. The median home price is forecasted to reach more highs in the coming months before the cooling-off trends begin this fall.
More owners are putting homes up for sale this year as a result of which a record-high share of homes for sale is “new listings.” At the same time, these homes are selling fast with time on the market being 32 days shorter than at this time last year. This means while the influx of sellers will help relieve some of the competitive pressure buyers are facing they still need to make their offers strong enough to beat out a multiple-bid scenario.
According to the latest data released by the National Association of Realtors, existing-home sales declined for the third straight month in April. This decline is the result of the low inventory and swiftly rising prices. The supply of homes for sale at the end of April was down 20.5% from one year ago. There were 1.16 million homes for sale, representing a 2.4-month supply at the current sales pace.
Sales of existing homes dropped 2.7% in April from March to a seasonally adjusted annualized rate of 5.85 million units. Sales were 33.9% higher than April 2020 when the housing market had shut down at the start of the pandemic. In the previous month, the existing home sales had fallen 3.7% from the prior month to a seasonally-adjusted annual rate of 6.01 million.
“Despite the decline, housing demand is still strong compared to one year ago, evidenced by home sales from this January to April, which are up 20% compared to 2020,” said Lawrence Yun, NAR's chief economist. All but one of the four major U.S. regions witnessed month-over-month drops in home sales, but each registered double-digit year-over-year gains for April. The Midwest housing market was the only region to see sales growth between March and April, with a 0.8% uptick. The Northeast had the biggest decline, with a 3.9% drop in sales.
Pending home sales decreased 4.4% in April from the prior month, in part due to record-low inventory of homes for sale in the first quarter of 2021, according to NAR. All four U.S. regions recorded year-over-year increases, but only the Midwest witnessed month-over-month gains in terms of pending home sales contract transactions. Pending housing sales are a forward-looking indicator of closed sales.
Because of the typical duration of time, it takes for a housing sale to close, experts consider pending sales to be a decent indicator of potential future closed sales in one to three months. It is important to bear in mind, however, that not all signed contracts will be closed successfully. as they are susceptible to changes in market conditions such as the availability of financing for homebuyers.
Housing Sales 2021
(Existing Home Sales For April By N.A.R.)
|Northeast||Existing-home sales fell 3.9% from March, but the annual rate of 730,000 represents a 30.4% leap from a year ago.|
|The median price in the Northeast was $381,100, up 22.0% from April 2020.|
|Midwest||Existing-home sales grew 0.8% to an annual rate of 1,290,000 in April, a 13.2% increase from a year ago.|
|The median price in the Midwest was $259,300, a 13.5% rise from April 2020.|
|South||Existing-home sales in the decreased 3.7%, recording an annual rate of 2,600,000 in April, up 39.0% from the same time one year ago.|
|The median price in the South was $289,600, a 15.8% jump from one year ago.|
|West||Existing-home sales in the West declined 3.1% from the month prior, posting an annual rate of 1,230,000 in April, a 53.8% surge from a year ago.|
|The median price in the West was $501,200, up 19.9% from April 2020.|
Will This Housing Bubble Burst in 2022?
The housing industry and its economic factors depend on supply and demand. The existing home sales data shows the tightest housing market on record. The demand has not gotten significantly shorter since last May/June, and buyers and sellers are continuing to connect at a record pace. This trend shows that the housing market is as strong as it was during the housing bubble. It is nowhere too close to a level where you can imagine the balance of real estate market conditions. Speedy home sales continue in all regions of the country and the median sales price continues to have double-digit growth.
Although millions were laid off or furloughed it didn’t prevent house hunters from buying homes across the nation. As a result, the housing market saw the highest pace of sales growth since the height of the unprecedented housing boom in 2005. That expansion was driven by negligent lending in the subprime mortgage market and the current housing boom is driven by the intense demand and record-low mortgage rates. Both of these factors were driven by the coronavirus pandemic.
The housing market has seen record-breaking growth since last June after briefly put on hold during the outbreak of the pandemic this spring. As prices keep climbing month-over-month, it just shows the resilience of the US housing market in the face of an ongoing economic recession. Although sellers are listing more & more homes we need more new home supply to add to inventory and slow these sharp price increases.
When Many market watchers are curious to know how long will this housing boom last or will the market eventually crash? Well, so far, the housing market continues to be sizzling hot resulting in higher home prices and quick-selling homes. The only factor of concern is the housing supply which continues to fall short of demand. Increasing the supply of homes for sale would certainly help bring balance to this strong seller’s market, but the most recent housing market trends don't suggest that inventory is likely to improve soon.
Housing Market Weekly Trends
Realtor.com's weekly market data for the week ending June 5, 2021, shows that the median home price of all the listings increased by 13.6 percent over last year, notching the 43rd consecutive week of double-digit price appreciation. In June of last year, home listing prices were rising at the rate of 5.1% year-over-year. The current rate of appreciation is almost two and a half times more than that. However, the influx of new sellers over the last couple of months has helped slow price gains.
The median home listing prices are at record highs, with the national median price reaching $380,000 in May 2021. Homes are still selling fast but buyer-friendly signs include more options for sale and somewhat slower price growth as compared to the previous month.
Here's how the national housing market has been trending for the past couple of weeks and its comparison with the time when the shutdowns were imposed in the country.
- Housing demand continues to outpace the supply side.
- With buyers active in the market because of the uptick in mortgage rates, homes are selling quickly.
- Time on the market was 35 days faster than last year.
- Homes are expected to be selling fastest from now until mid-summer.
- The housing market is still relatively undersupplied, and buyers can’t buy what’s not for sale.
- New listings were down 1 percent, taking a dip after 8 consecutive weeks of growing numbers of new sellers.
- Fannie Mae's May 2021 survey shows the rising seller sentiment, so this week’s dip in new listings should be a temporary one.
- The potential gains in new listings will lead to some big numbers ahead in the peak homebuying season.
- Total active inventory or homes for sale on the market remains 46 percent below this time last year.
- This means a still limited number of homes for sale, but a substantial improvement over the last few weeks.
- The total number of homes actively available for sale continues to be less than half of what it was last year.
What Happens Next? Mortgage rates have hovered around three percent since March. Despite this favorable rate climate, there remains a shortage of homes for sale. The lack of housing supply has been compounded by the disruptions in the labor market and expensive home-building materials such as lumber that are driving up the cost of new housing, making it difficult for homebuyers to find homes to purchase.
Recap: How mortgage rates have moved over the past week (From Bankrate)
- 30-year fixed mortgage rate: 3.08%, down from 3.10% last week, -0.02
- 15-year fixed mortgage rate: 2.36%, down from 2.37% last week, -0.01
- 5/1 ARM mortgage rate: 3.24%, up from 3.15% last week, +0.09
- Jumbo mortgage rate: 3.09%, down from 3.12% last week, -0.03
Mortgage experts were mixed in the rate trend predictions in Bankrate’s survey for the week of June 10-16. In response to Bankrate’s weekly poll, 54 percent said rates will go down, while 30 percent said rates will stay the same, and just 15 percent expect rates to rise. Mortgage rates are closely tied to the health of the U.S. economy which is on an upswing. Hence, it should lead to higher rates in June and the coming months.
In May 2021, the unemployment rate declined by 0.3 percentage points to 5.8 percent, and the number of unemployed persons fell by 496,000 to 9.3 million. These measures are down considerably from their recent highs in April 2020 but remain well above their levels before the coronavirus pandemic.
Reduced purchasing power (due to higher rates) may relieve some of the pressure on home prices as marginal buyers are forced out of the market as mortgage rates slowly climb to the 3.5 percent range by year's end, but competition will remain fierce among those who can still afford to buy. For the rest of the year, those wishing to refinance should be able to find reasonable deals, though at somewhat higher rates.
Despite early warnings of an impending crash, the housing market has so far avoided the downturn that the coronavirus pandemic has wreaked on other sectors of the US economy. The median existing-home sales price in April was $341,600, a new record high that represents a 19.1% increase from a year before. That is both the highest median price on record and the largest annual increase on record. Every region of the housing market recorded price increases and it also marks 110 straight months of year-over-year gains.
Properties stayed on the market for 17 days in April on average, and 88% of homes sold last month were on the market for less than a month. Single-family home sales dropped to a seasonally-adjusted annual rate of 5.13 million in April, down 3.2% from 5.30 million in March, and up 28.9% from one year ago. The median existing single-family home price was $347,400 in April, up 20.3% from April 2020.
Most homes continue to sell faster and the total number of homes available for sale continued to be constrained in May. You will still see a hot sellers’ real estate market in most areas of the country. According to Realtor.com, midwest and northeast housing markets are the hottest and together make up 14 of the 20 hottest housing markets in the country.
Manchester-Nashua, NH maintains its hold as the hottest housing market in the country with half of all homes in Manchester selling in under 10 days. Concord, NH holds the second-highest spot on the list. The main criteria for hotness are the market demand and the pace of the market as measured by the number of days a listing remains active on its portal.
Other recent market trends show that more sellers than normal are planning to list their homes for sale in the next 12 months. With this trend, homebuyers will certainly have more options to choose from especially in this challenging housing market. The Federal Reserve is playing a key role to support the economy and housing market by keeping borrowing costs low for shorter-term loans.
It has a huge impact on all kinds of interest rates, including mortgage rates, through its control of short-term interest rates. Fed is also helping to keep mortgage rates low by purchasing sizable amounts ($40 billion worth every month) of agency mortgage-backed securities (MBS). The Fed has also indicated it plans to keep rates low at least until 2022.
35% of respondents to “Fannie Mae’s May National Housing Survey” said it was a good time to buy a home, the lowest in the survey’s history and down from 47% in April. The percentage who said it is a bad time to buy increased from 48% to 56%. As a result, the net share of those who say it is a good time to buy decreased 20 percentage points month over month. Seller sentiment remained unchanged as 67% of respondents said they believed it was a good time to sell a home.
The rate of price growth in double-digits and higher mortgage rates will further discourage some potential homebuyers from entering the market. Hopefully, buyers who are currently struggling to find a house would see an improvement in the number of listings available to them as more sellers list their houses for the spring buying season. Realtors & brokers believe that the vaccine roll-out is expected to ease seller apprehensions, which should improve the supply trends throughout the year.
However, the lack of adequate supply and rise in mortgage rates will likely continue to hold back potential home sales. That's one reason why Fannie Mae has decreased their housing sales forecast for 2021. But it doesn't mean that the housing market will crash. They just expect a slowdown in the monthly pace of both existing and new sales later in the year. However, on an annual basis, the total home sales in 2021 are still predicted to be 6.2 percent higher than last year. Even as mortgage rates drift upward, home purchase demand remains robust.
Mortgage rates are expected to remain near borrower-friendly levels and will help maintain strong housing demand in 2021. Hence, the supply-demand dynamics will continue to push home prices up by 8 percent in 2021 – up from the previously predicted rate of 4.2 percent (FHFA Home Price Index). Another interesting thing is that this higher home price forecast more than diminishes the modestly higher interest rate forecast. Therefore, the mortgage originations are also expected to tick up by 14.5 percent year-over-year in 2021.
Fannie Mae predicts overall single-family mortgage market originations in 2021 and 2022 to total $4.0 trillion and $3.0 trillion, up from $3.9 trillion and $2.9 trillion, respectively. However, according to another mortgage giant, Freddie Mac, the total originations will decline to $3.5 trillion in 2021 as higher mortgage rates have the potential to soften the robust demand the housing market has been experiencing.
Freddie Mac predicts home prices will rise by 6.6 percent in 2021, slowing to 4.4 percent in 2022, while it expects home sales to reach 7.1 million in 2021, and then declining to 6.7 million homes in 2022. Even with rising mortgage rates and higher prices, the housing market should remain strong due to very tight inventories and increasing demand as more millennials are projected to buy houses this year.
Now millennials make up the largest share of homebuyers in the US, according to a 2020 survey from the NAR. According to a new study by Realtor.com, buying is more cost-efficient than renting in a growing number of the largest cities in the country. This is encouraging news for the millions of millennials who are approaching peak homebuying age.
The U.S. housing market is 3.8 million single-family homes short of what is needed to meet the country's housing demand, up 52% as compared with 2018's shortfall, according to a new analysis from mortgage-finance company Freddie Mac. In 2018, Freddie Mac had estimated that the housing market was 2.5 million units short of what it needed to meet long-term demand. The new estimate is as of the end of 2020 and it emphasizes the severity of the housing supply.
While the current housing shortage is also due to the moratorium on foreclosures but it's mainly because of home builders not keeping up with long-term demand growth. Single-family housing starts rose last year to 991,000 units but builders would need to construct between 1.1 million and 1.2 million single-family homes a year to meet long-term demand. The last time single-
Hence, there's no doubt that with the continued supply-demand imbalance, this upward pull on prices is expected to remain consistent in 2021 and beyond. The current pace of price appreciation can soften a bit only if either supply ramps up quickly or demand softens. Fortunately, there are reasons to believe a change in the trend’s intensity may be on the horizon as more inventory is expected to become available later this spring. In the last week itself, we could see the beginning of a usual seasonal trend of an uptick in new homes for sale on the market.
The results of more listings in the summer buying season and higher mortgage rates are that both could slow down the pace of home price appreciation. If homes would sit on the market longer, markets will then accumulate more active listings. In the second half of this year, we will see higher mortgage rates and, as they continue ticking up, which may begin to create a ceiling on the median home price growth, as monthly payments on new mortgages become less and less affordable.
Homebuilding will continue and new homes will pile up a bit which will slow down the rate of price appreciation. There are reasons to believe that the housing market will remain tight in 2021 because there are first-time buyers (Millennials) coming into the market. First-time buyers were responsible for 32% of sales in March, up from 31% in February. About 4.8 million millennials are turning 30 this year and will continue to do so for the next three years, a significant positive force for the economy and housing. The main challenge for markets is meeting this upsurge in demand with a declining supply.
A recent Zillow survey shows that millions will enter the housing market in 2021 to purchase their dream house. In their survey, more than 1 in 10 Americans (10%) said they moved in the past 12 months, either by choice or circumstance. And now, with the COVID-19 vaccine circulating and the economy slowly picking up steam, Zillow researchers say millions of more households could be potential homebuyers in 2021.
In fact, we have seen a huge influx of movers wanting to take advantage of larger houses and larger plots for a fraction of the price they would pay in the metro area. Specifically housing markets such as Portland, Maine, Bay City, Michigan, Pueblo, Colo. And many zip codes in Idaho have become popular destinations for moving since the beginning of COVID-19.
In contrast, data from Zillow showed that housing inventory climbed the highest in four major real estate markets – Los Angeles, Chicago, San Francisco, and New York. “More affordable and medium-sized subway areas across the Sun Belt have seen significantly more people coming than going – especially from more expensive, larger cities to the north and coast,” said Jeff Tucker, chief economist at Zillow.
The new construction of single-family homes is expected to grow this year. In April, the median price ($372,400) is 2o% over the median price posted a year earlier. Even though new home prices are rising due to an increase in lumber prices, the lack of existing homes for sale means new construction is the only option for some prospective home buyers.
Housing Sales Trends For New Residential Homes | April 2021
Sales of existing homes are at an all-time high but new home sales have also risen during the pandemic. Those sales are allowing builders to raise prices. Buyer traffic is converting into sales at a record rate. Residential construction ended in 2020 on a strong note. Housing starts rose 5.8% to 1.67 million annualized units in December. Total starts were 2.8% higher than a year ago. The demand remains strong as the prime buying season begins to heat up.
After a significant downward revision for the preliminary March data, April recorded a decline of 5.9% for sales of newly-constructed single-family homes. Sales of new single‐family houses in April 2021 were at a seasonally adjusted annual rate of 863,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 5.9 percent (±11.2 percent) below the revised March rate of 917,000 but is 48.3 percent (±24.5 percent) above the April 2020 estimate of 582,000.
Higher building costs, longer delivery times, and general unpredictability in the construction supply chain are now having measurable impacts on new home prices. The median sales price of new houses sold in April 2021 was $372,400, 20% higher than a year ago. The average sales price was $435,400. The seasonally‐adjusted estimate of new houses for sale at the end of April was 316,000. This represents a supply of 4.4 months at the current sales rate.
Let us discuss in detail the various housing indices & their predictions for 2021 & 2022. We have updated this article with the latest housing market report from various credible sources like Realtor.com (check reference section).
New Housing Construction Trends & Homebuilder Confidence
The NAHB also gets input from builders on how confident they are in the housing market based on buyer behavior, sales, and incorporates any forecasts as well. The building permits have rebounded from pandemic lows and builders are racing to fill the gap between supply and demand.
One year after home construction ground to a screeching halt due to the Covid pandemic, builders continue to be bullish. They are facing strong demand from potential buyers because the existing home market continues to suffer from a record low number of listings. It is getting difficult for them to meet this housing demand amid supply delivery challenges and higher costs for materials are not improving.
Builder sentiment had increased 1 point in April to 83. It held stable in May 2021, despite growing concerns over the price and availability of most building materials, including lumber. Low interest rates are supporting housing affordability in a market where the cost of most materials is rising.
The latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today shows that builder confidence in the market for newly-built single-family homes is 83 in May, unchanged from April. The HMI index gauging current sales conditions held steady at 88, and the gauge charting sales expectations in the next six months rose one point to 81. The component measuring traffic of prospective buyers fell one point to 73.
Looking at the three-month moving averages for regional HMI scores, the South rose one point to 84 and the West held steady at 90. The Northeast fell four points to 82 and the Midwest posted a three-point drop to 75.
“Builder confidence in the market remains strong due to a lack of resale inventory, low mortgage interest rates, and a growing demographic of prospective home buyers,” said NAHB Chairman Chuck Fowke, a custom home builder from Tampa, Fla.
According to the NAHB, lumber prices have skyrocketed nearly 250% since April 2020, causing the average price of a new single-family home to increase by nearly $36,000. NAHB reported based on data from Random Lengths Framing Lumber Composite which is comprised using prices from the highest volume-producing regions of the U.S. and Canada.
Despite the soaring lumber prices, demand continues to outpace supply, and shortages in just about every building material category are creating delays for contractors. NAHB is working with government officials to develop solutions to these sharp price increases which threaten housing affordability across the nation.
In 2021, the Mortgage Bankers Association (MBA) forecasts single-family housing starts to be around 1.134 million. And that could just be the beginning, as projections going forward are even rosier: 1.165 million single-family homes in 2022 and 1.210 million in 2023. New home builders will ramp up production to help relieve the shortage of inventory of homes for sale throughout the United States. The added inventory would no doubt aid buyers in their search to secure their dream home, while also helping to ease price increases throughout the country.
According to Urban Land Institute, real estate market conditions and values in the U.S. are expected to rebound in 2021 and trend even higher in 2022, with single-family homes outperforming other sectors such as commercial, retail, hotel, and rental. Home prices will grow an average of 4.1% over the next three years, above the long-term average of 3.9%, according to the report, based on a survey of 43 economists at 37 leading real estate organizations.
Housing Price Growth Continues in Double-Digits For Q1 2021
The housing market trends in the first quarter of 2021 showed that home buyers will face a competitive spring season as inventory remains low. The exploding demand has led buyers to desperately bid up the prices of available properties, sending home prices soaring. House prices in all the major local real estate markets continue to rise. The housing market is becoming harder for home buyers. The demand is really high, and the supply and inventory are deficient.
The FHFA HPI is the nation's only collection of public, freely available house price indexes that measure changes in single-family home values based on data from all 50 states and over 400 American cities that extend back to the mid-1970s. House prices rose 12.6 percent from the first quarter of 2020 to the first quarter of 2021 according to the Federal Housing Finance Agency House Price Index (FHFA HPI®). House prices were up 3.5 percent compared to the fourth quarter of 2020. FHFA's seasonally adjusted monthly index for March was up 1.4 percent from February.
- House prices have risen for 39 consecutive quarters, or since September 2011.
- House prices rose in all 50 states and the District of Columbia between the first quarters of 2020 and 2021.
- House prices rose in 99 of the top 100 largest metropolitan areas in the U.S. over the last four quarters.
- Annual price increases were greatest in Boise City, ID, where prices increased by 28.2 percent.
- Prices were weakest in Urban Honolulu, HI, where they decreased by 0.7 percent.
The top five states with the highest annual house appreciation were:
- Idaho 23.7 percent
- Utah 19.2 percent
- Arizona 17.4 percent
- New Hampshire 16.2 percent
- Connecticut 15.9 percent
The states showing the lowest annual house appreciation were:
- Hawaii 4.7 percent
- Louisiana 6.8 percent
- Wyoming 6.9 percent
- North Dakota 7.5 percent
- Mississippi 8.1 percent
The housing demand will continue to surge due to several factors. For e.g; the millennials have aged into their prime homebuying years, and they are now the fastest-growing segment of home buyers. In 2018, millennial homeownership was at a record low but the situation has changed markedly. They are no longer holding back when it comes to homeownership. According to the National Association of REALTORS’ Home Buyers and Sellers Generational Trends Report, millennials make up the largest share of the homebuying population at 38 percent. The older millennials (aged 30 to 39) making up 25 percent of that and younger millennials (age 22 to 29 years old) making up 13 percent.
These younger consumers are mostly buying first homes (86 percent of younger millennials and 52 percent older ones). According to Bloomberg, not only are millennials buying homes but their “starter homes” are multimillion-dollar homes rather than the traditional humble first property.
Millennials are expected to continue to drive the market in 2021 and the participation of first-time homebuyers and older millennials is widely forecast to be elevated. Hence, the “2021 housing market” is looking to be super-competitive for home buyers. With homebuyers active and supply still lacking, the current pace of home price growth seems unlikely to change in the near term.
Therefore, homebuyers have to face more competition and act more quickly than usual to snag their dream home. Housing prices had already started rising before the pandemic arrived but the pandemic created a rapid acceleration in double-digits. In a new Urban Institute report, researchers found that if the country continues down the same road, over the next two decades the US homeownership rate is set to decline to 62.1 percent. They project the overall homeownership rate will fall from 65 percent in 2020 to 62 percent by 2040.
Household growth averaged 12.4 million per decade from 1990-2010, 7.3 million from 2010-2020. They estimate an average growth of 8.5 million from 2020-2030 and 7.6 million from 2030-2040. This decline is the result of slowing US population growth and lower headship rates for most age groups. Another key finding is that the renter growth will be more than twice the pace of homeowner growth from 2020 to 2040. Between 2020 and 2040, there will be 9.3 million net new renter households, a 21 percent increase.
The main reason behind such an extreme pace of home price appreciation is the basic economic seesaw of supply and demand. The country needs far more units to meet demand but there has been a large and persistent shortfall in recent years. On top of that, the pandemic has really knocked down homebuilders' ability to fill the housing supply as they are running out of land.
The housing market has already been running too short of previously owned homes. Buyers are scrambling to take advantage of plummeting mortgage rates that make the cost of buying a home much cheaper. The number of homes for sale has plummeted and remained down around 30 percent of what it has been in recent years — leaving the market with nearly twice the demand and two-thirds of the supply.
Both the inventory of homes and mortgage rates are now at their historic lows. The months’ supply of existing homes for sale has fallen to 1.9 months, the lowest level since the series began in 1999. With inventories this tight, it is unlikely that existing home sales can continue to rise at last year's pace, which means there could be a little slowdown in existing sales throughout 2021. ESR Group expects home sales to rise 3.8 percent in 2021.
The rise in remote work has also sparked a new suburban boom and the scarcity of developed land means that builders could be unable to meet the rising demand and home prices would continue to rise in 2021. One thing that has been talked about a lot is that suburban housing markets are booming because of outbound migration from cities. The pandemic has caused some homebuyers to search for homes in a different area than originally planned.
Various surveys indicate that interest in rural areas and suburbs is up and interest in urban areas is down. However, Zillow published an exhaustive study examining every conceivable housing-market data point related to cities and suburbia to see if there are major divergences that suggest an urban-to-suburban migration trend.
According to that study, suburban housing markets have not strengthened at a disproportionately rapid pace compared to urban markets. Both region types appear to be hot sellers’ markets right now – while many suburban areas have seen a strong improvement in housing activity in recent months, so, too, have many urban areas.
Nevertheless, the pandemic has increased the desire for houses with a bit more space and a garden. Couple that with record-low interest rates, and prices are rising dramatically all over the country from urban-to-suburban markets.
For now, there are no indications that price growth is going to slow. Zillow Economic Research predicts that annual home value growth will rise as high as 13.5% by mid-2021 and for home values to end 2021 up 10.5% from their current levels. Their forecast also calls for sales volume to remain elevated in the coming year, finishing 2021 at 6.9 million sales, the most since 2005.
In previous forecasts, the company predicted a 4.8 percent increase in home values between August 2020 and August 2021. The current extreme demand that is reflected in sharply rising prices, can be attributed to the pent-up demand for home purchases from the March-July period when a great part of the country was in total lockdown.
Effect of Low Mortgage Rates on Housing Market
Housing Affordability is driven largely by the gap between household income and home value. It is influenced by the balance between housing supply and demand, the labor market, and mortgage rates by way of Federal monetary policy. 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.
The most commonly used indicator in the US and many other countries is the ratio of house prices to incomes or earnings. A higher ratio indicates relatively more affordability. A ratio of 100 indicates that median-family income is just sufficient to purchase the median-priced home. Ratios above 100 indicate that the typical household has more income than necessary to purchase the typical house.
Therefore, low-income households spending a high proportion of their income on housing may and vice versa.
In 2020, mortgage rates were reduced due to the pandemic which helped offset the sting of higher prices. In 2021, mortgage rates are expected to stop dropping. Rather, the National Association of Realtors expects rates to average 3.1% and the Mortgage Bankers Association says mortgage rates will average 3.3% in 2021. These rate estimates are both up from the 3.0% mortgage rate average in 2020 but lower than 2019 average rates.
Low rates give borrowers more buying power and a significant decline in mortgage rates can help push up home prices as witnessed in recent months. If mortgage rates continue to rise in 2021, affordability is likely to become a bigger challenge this year. The combination of intense demand and the low mortgage rates has pushed home prices to levels that are making it difficult to save for a down payment, particularly among first-time buyers.
According to Bankrate’s latest survey of the nation’s largest mortgage lenders, as of June 27, 2021, the average 30-year fixed-mortgage rate is 3.10 percent, up 2 basis points over the last week. Last month on the 7th, the average rate on a 30-year fixed mortgage was lower, at 3.06 percent. The average rate you’ll pay for a 15-year fixed mortgage is 2.37 percent, unchanged over the last week.
- At the current average rate, you’ll pay a combined $427.02 per month in principal and interest for every $100,000 you borrow.
- Compared to last week, that’s $1.09 higher.
- Monthly payments on a 15-year fixed mortgage at that rate will cost around $661 per $100,000 borrowed.
Here’s Bankrate’s example to show how soaring home prices and plunging mortgage rates can have offsetting effects.
Let’s say you chose not to buy a $300,000 home a year ago when the 30-year mortgage rate was around 3.75 percent. Your 20 percent down payment would’ve been $60,000 and your monthly payment would’ve been $1,111. The price of the same house has jumped to $335,000 today. However, you can get a 30-year mortgage at 3 percent. As a result, your monthly payment rises only slightly, to $1,130. However, you’ll have to come up with an extra $7,000 to make a 20 percent down payment.
Low mortgage rates help but don't eliminate the risk of affordability crunch that the housing market could still face if home prices continue to rise at a rapid pace. Buying a home in a seller’s market can feel like you’re losing money. You may just wait a few months or even a year so that prices will flatten (or come down). The problem is that prices could keep rising to the point where you’re priced out of the market. There’s no guarantee either way.
Therefore, we feel this is the right time to buy your dream property or you can opt to refinance at today’s rates to at least cut your monthly mortgage payments. The present scenario makes it appealing to buyers who have been spending all this money on rent. Demand is robust throughout the country, but homebuyers continue to be held back by the lack of homes for sale and rapidly increasing home prices. The combination of rising mortgage rates and increasing home prices will accelerate the decline in affordability and further squeeze potential home buyers during the spring home sales season.
The Federal Reserve has decided to leave the Fed Funds rate unchanged and gave every indication that policy moving forward is going to be largely unchanged. Mortgage rates will be affected by Fed policy only when the Fed stops purchasing MBS (mortgage-backed securities). As of now, Fed continues to take these measures to lower short-term interest rates.
Federal Reserve will continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage‑backed securities by at least $40 billion per month to support the U.S. economy and the housing market. When they refer to agency MBS, they mean specifically purchasing those mortgage-backed securities which are made up of mortgages from Fannie Mae, Freddie Mac, and Ginnie Mae.
The National Association of Realtors expects rates to average 3.1% and the Mortgage Bankers Association (MBA) says mortgage rates will average 3.3% in 2021. These rate estimates are both up from the 3.0% mortgage rate average in 2020 but lower than 2019’s average rates. Many experts say it could be years before mortgage rates return to their pre-pandemic levels.
Expect mortgage rates to continue to hover around record lows. The Federal Reserve has reassured that it will keep interest rates and its bond-buying program unchanged — downplaying any urgency to bring borrowing costs back up from their lowest levels in history at near zero.
The Fed has cut its target for the federal funds rate, the rate banks pay to borrow from each other overnight, by a total of 1.5 percentage points since March 3, 2020, bringing it down to a range of 0% to 0.25%. The federal funds rate is a benchmark for other short-term rates, and also affects longer-term rates, so this move is aimed at lowering the cost of borrowing on mortgages, auto loans, home equity loans, and other loans, but it will also reduce the interest income paid to savers.
US Housing Market Trends & Forecast | June 2021
Before the pandemic, the housing market was remarkably strong. The coronavirus crisis response was unprecedented. The federal government ordered a de facto shutdown of the entire private economy, closing an estimated eighty percent of businesses. It has caused unemployment to soar to at least ten percent, while tens of millions are idled. We are now in a period where we can compare housing trends against the early days of the pandemic when the real estate market was largely halted.
Back in March of last year, the real estate market looked to be headed into a steep decline due to widespread stay-home orders. Since then, homebuyers, supported by low interest rates, have kept the US housing market afloat. The pandemic has certainly affected every sector but the residential real estate market has been very resilient and it continues to be a pillar of support for the economy. The housing market bounced back in 2020 much faster than other sectors of the economy and has sustained that growth and pace into 2021.
2020 was a record-breaking year for the US housing market. The typical U.S. home was worth $266,104 in December, up 8.4% (or $20,587) from a year ago. A total of 5.64 million homes were sold in 2020, up 5.6% from 2019 and the most since before the Great Recession, according to Lawrence Yun, NAR’s chief economist. Sales also rose 0.7% from November and 22.2% year over year. Existing home sales reached the highest level in 13 years.
While we still face economic and health challenges ahead, it is no doubt that the nation will continue to recover from this pandemic and an improving economy will continue to prop up the housing market competition. Industry experts believe the housing market will remain strong and is set to break more records in 2021.
This time the housing market is largely being driven by two factors: a shortage of available housing inventory and extremely low interest rates. Double-digit annual growth in both list and sale prices shows an extreme lack of inventory and incredible demand — A sign of a seller's real estate market.
The housing market is still hot, but we may be starting to see rising home prices hurting affordability unless the mortgage rates continue to decline in 2021. Additionally, even if mortgage rates help blunt the effects of higher home prices on monthly payments, they don’t offset the need for larger down payments and other closing costs as home prices rise.
Mortgage applications fell 3.1 percent in the week ending June 4th, the third consecutive weekly drop, according to data from the Mortgage Bankers Association (MBA). The weekly survey showed that applications to refinance a home loan were down 5.1 percent, pushing the index to its lowest since February of 2020 while purchases edged up 0.3 percent. The average fixed 30-year mortgage rate edged down by 2 bps to 3.15 percent.
- The Market Composite Index, a measure of mortgage loan application volume, decreased 3.1 percent on a seasonally adjusted basis from one week earlier.
- The Refinance Index decreased 5 percent from the previous week and was 27 percent lower than the same week one year ago.
- The FHA share of total applications decreased to 9.5 percent from 9.6 percent the week prior.
- The VA share of total applications decreased to 11.2 percent from 10.9 percent the week prior.
- The USDA share of total applications remained unchanged from 0.4 percent the week prior.
- The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) increased to 3.15 percent from 3.17 percent.
- The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.12 percent from 3.16 percent.
- The average contract interest rate for 15-year fixed-rate mortgages decreased to 2.52 percent from 2.56 percent.
According to Zillow, the current typical value of homes in the United States is $281,370. This value is seasonally adjusted and only includes the middle price tier of homes. In May 2020, the typical value of homes $253,000. Home values have gone up 11.6% over the past year and Zillow predicts they will rise 11.8% over the next twelve months.
Realtor.com’s May 2021 housing data shows that the growth rate in median listing prices has finally slowed after almost a year of continuous acceleration. The slow down in price growth is a good sign for buyers but prices are still rising because inventory remains constrained and the typical home is now spending over a month less on the market than last year. In May, home listing prices continued to increase at double-digit rates compared to last year to break through recent all-time highs fueled by buyer demand, which also continued to snap up homes at a rate almost 32 days more quickly than last year. However,
Homebuyers may need to prepare for a competitive season with lower inventory (especially in more affordable price categories), continuing growth in asking prices in response to strong buyer demand, and slowly rising interest rates. Buyer demand remains far more recovered than supply and continues to grow at an unprecedented pace. Here are the key housing trends of the last month.
- The national inventory of active listings declined by 50.9% over last year, while the total inventory of unsold homes, including pending listings, declined by 20.8%.
- Newly listed homes on the market are up 5.4% nationally compared to a year ago and by 12.4% for large metros over the past year. Sellers are still listing at rates lower than previous years, however.
- The May national median listing price for active listings was $380,000, up 15.2% compared to last year. Large metros saw an average price gain of 7.4% compared to last year.
- Nationally, the typical home spent 39 days on the market in May, 32 days less than the same time last year.
Housing Market Trends For Supply
Nationally, the inventory of homes for sale in May decreased by 50.9% over the past year, a lower rate of decline compared to the 53% drop in April. This amounted to 523,000 fewer homes actively for sale on a typical day in May compared to the previous year. The total number of unsold homes nationwide – a metric that includes active listings and listings in various stages of the selling process that are not yet sold– is down 20.8% percent from May 2020.
In May, newly listed homes grew by 5.4% on a year-over-year basis compared to the earlier days of the COVID-19 pandemic last year. Newly listed homes are still down 25.2% from the typical rate of newly listed homes in 2017 to 2019. However, the share of newly listed homes compared to active daily inventory hit a historical high of 44.4%, 17.3 percentage points higher than last year and 15.1 percentage points above typical levels seen in 2017 to 2019.
New properties are coming on the market every week but are also being sold quickly. The total housing supply is not enough to mark it as a buyer’s real estate market and it is not equal to what is needed to relieve the historically tight home supply.
Housing inventory in the 50 largest U.S. metros overall dropped by 49.4% over last year in May, a small deceleration compared to last month’s 51.1% decrease, hopefully signaling a leveling off in the rate of decline. Since the South was the last region to be affected by the pandemic, it is still seeing the largest year-over-year decline in active listings. Southern large metro housing markets are also seeing a small decline in new listing while Northeast, Midwest, and West, are growing by 32.2%, 18.5%, and 15.9% year-over-year, respectively.
Housing Markets that saw the largest year-over-year increase in newly listed homes for May:
- Buffalo, where newly listed homes grew by +64.3%
- Philadelphia, where newly listed homes grew by +52.5%
- Washington, D.C., where newly listed home grew by +48.9%
The only housing Markets that saw the year-over-year decrease in newly listed homes for May:
- Nashville, where newly listed home declined by -31.7%
- Oklahoma City, where newly listed home declined by -26.7%
- Raleigh, where newly listed home declined by -23.5%
According to the National Association of Realtors®, the total housing inventory at the end of April 2021 amounted to 1.16 million units, up 10.5% from March's inventory and down 20.5% from one year ago (1.46 million). Unsold inventory of all properties sits at a 2.4-month supply at the current sales pace, slightly up from March's 2.1-month supply and down from the 4.0-month supply recorded in April 2020.
Housing Market Trends For Median Listing Prices
Realtor.com's data shows that the median national home listing price grew by 15.2% over last year and reached $380,000 in May, lower than last month’s growth rate of 17.2%. The median listing price of $380,000 is a new all-time high. Asking prices in the nation’s largest metro housing markets grew by an average of 7.4% compared to last year, but are slightly lower than last month’s rate of 11.6%. Listing prices are increasing most in western housing markets, where they are now growing at an average rate of 13.3% over last year, compared to a growth rate of 8.2% for southern metros, 5.9% for northeastern metros, and 1.0% for midwestern metros.
Housing Price Trends: National Listing Price Growth in 2021
|In January 2021, the median national home listing price grew by 15.4 percent year-over-year, to $346,000.|
|In February 2021, the median national home listing price grew by 13.7 percent year-over-year, to $353,000.|
|In March 2021, the median national home listing price grew by 15.6 percent year-over-year, to $370,000.|
|In April 2021, the median national home listing price grew by 17.2 percent year-over-year, to $375,000.|
|In May 2021, the median national home listing price grew by 15.2 percent year-over-year, to $380,000.|
Housing Markets that saw the largest year-over-year increase in listing prices in May:
- Austin, where median listing price grew by +32.2%
- Riverside, where median listing price grew by +21.5%
- Las Vegas, where median listing price grew by +18.5%
Housing Markets that saw the largest year-over-year decrease in listing prices in May:
- Milwaukee, where median listing price declined by -16%
- Indianapolis, where median listing price grew by -7.8%
- Louisville, where median listing price grew by -5.1%
|Month||Metros With Highest YoY Price Gains||Metros With Highest YoY Price Declines|
|January 2021||Austin (+30.2%)||Miami (-3.2%)|
|Rochester (25.9%)||Minneapolis (-0.4%)|
|Los Angeles (+22.4%)||—|
|February 2021||Austin (+37.2%)||Miami (-2.5%)|
|Rochester (27.6%)||Denver (-1.7%)|
|Buffalo (+25.0%)||Orlando (-1.1%)|
|March 2021||Austin (+39.8%)||Memphis (-1.4%)|
|Buffalo (+28.3%)||Miami (-1.2%)|
|Los Angeles (+24.8%)||Denver (-0.4%)|
|April 2021||Austin (+40.6%)||Memphis (-4.0%)|
|Los Angeles (+23.6%)||Milwaukee (-2.4%)|
|Riverside (+22.0%)||Denver (-0.4%)|
|May 2021||Austin (+32.2%)||Milwaukee (16.0%)|
|Riverside (+21.5%)||Indianapolis (-7.8%)|
|Las Vegas (+18.5%)||Louisville (-5.1%|
Housing Market Trends For Median Sales Prices
According to the National Association of Realtors®, the median existing-home price for all housing types in April was $341,600, up 19.1% from April 2020 ($286,800), as every region recorded price increases. The median existing single-family home price was $347,400 in April, up 20.3% from April 2020. The median existing condo price was $300,400 in April, an increase of 12.6% from a year ago. April's national price jump marks 110 straight months of year-over-year gains.
Housing Sales Trends 2021
Homes for sale in May continued to sell more quickly than last year, as buyer demand remained on a strong footing. The typical home spent 39 days on the market this April, which is 32 days less than last year. This yearly decline has increased compared to last month when the home spent 43 days on the market (April), which was 20 days less than April 2020.
It is also 19 days less than the typical time on the market in April 2017 to 2019, indicating continuing record-setting demand for housing. In the 50 largest U.S. metros, the typical home spent 33 days on the market, and homes spent 25 days less on the market, on average, compared to last May.
Among these 50 largest metros, the time a typical property spends on the market has decreased most in the Northeast (-32 days), followed by the South (-26 days), the Midwest (-26 days), and the West (-18 days). No metros saw days on the market increase compared to last year in May.
Homes saw the greatest decline in time spent on the market compared to last year in:
- Pittsburgh (-48 days)
- Detroit (-45 days)
- Rochester (-45 days)
Total existing-home sales completed transactions that include single-family homes, townhomes, condominiums, and co-ops, decreased 2.7% from March to a seasonally-adjusted annual rate of 5.85 million in April. Sales overall jumped year-over-year, up 33.9% from a year ago (4.37 million in April 2020), according to the National Association of Realtors®.
First-time buyers were responsible for 31% of sales in April, down from 32% in March and 36% in April 2020. Individual investors or second-home buyers, who account for many cash sales, purchased 17% of homes in April, up from 15% in March and 10% in April 2020. All-cash sales accounted for 25% of transactions in April, up from both 23% in March and 15% in April 2020. Distressed sales – foreclosures and short sales – represented less than 1% of sales in April, equal to March's percentage but down from 3% in April 2020.
Single-family home sales dropped to a seasonally-adjusted annual rate of 5.13 million in April, down 3.2% from 5.30 million in March, and up 28.9% from one year ago. Existing condominium and co-op sales were recorded at a seasonally-adjusted annual rate of 720,000 units in April, up 1.4% from March and up 84.6% from one year ago.
Pending home sales decreased in April by 4.4% from the prior month, in part due to record-low inventory of homes for sale in the first quarter of 2021, according to the National Association of Realtors®. Pending sales dropped month-over-month in all U.S. regions except the Midwest. Year-over-year, however, pending home sales are up double digits in all regions.
The Pending Home Sales Index (PHSI), a forward-looking indicator of home sales based on contract signings, fell 4.4% to 106.2 in April. Year-over-year, signings jumped 51.7% as last year's pandemic-related shutdowns slumped sales to an all-time low. An index of 100 is equal to the level of contract activity in 2001.
The Northeast PHSI declined 12.9% to 85.3 in April, a 96.5% jump from a year ago. In the Midwest, the index increased 3.5% to 101.1 last month, up 39.4% from April 2020. Pending home sales transactions in the South fell 6.1% to an index of 128.9 in April, up 45.3% from April 2020. The index in the West decreased 2.6% in April to 92.0, up 57.3% from a year prior.
Housing Market & Mortgage Delinquencies 2021
Record-low mortgage rates and shortage of inventory are keeping the US housing market strong concerning buyer demand. Prices have been surging month-over-month breaking new records. The government’s moratoria have effectively stopped foreclosure activity on everything but vacant and abandoned properties. 2020 ended the year with a near-record number of seriously delinquent loans, but historically low levels of foreclosure activity.
There is a backlog of foreclosures building up due to this moratorium and no one knows how big that backlog is until after the government programs expire. The foreclosure backlog comprises three types of loans — loans that were in foreclosure before the government's moratoria; loans that would have defaulted under normal circumstances; and loans that would default due to job losses induced by the pandemic.
To help borrowers at risk of losing their home due to the coronavirus national emergency, FHFA announced that Fannie Mae and Freddie Mac (the Enterprises) are extending the moratoriums on single-family foreclosures and real estate owned (REO) evictions until June 30, 2021. This additional three-month extension allows borrowers to be in forbearance for up to 18 months.
It will give relief to more than 28 million homeowners with an Enterprise-backed mortgage. The foreclosure moratorium applies to Enterprise-backed, single-family mortgages only. The REO eviction moratorium applies to properties that have been acquired by an Enterprise through foreclosure or deed-in-lieu of foreclosure transactions. The current moratoriums were set to expire on March 31, 2021.
These actions are just the latest steps FHFA has taken to benefit homeowners and the mortgage market during the pandemic. The FHFA said it will continue to monitor the effect of coronavirus on the mortgage industry and update its policies as needed. Currently, FHFA projects additional expenses of $1.4 to $2 billion will be borne by the Enterprises due to the existing COVID-19 foreclosure moratorium and its extension.
The inflow of new mortgage delinquencies drops to a record low in March 2021, according to Black Knight's March 2021 Mortgage Monitor. Several factors contributed to particularly strong mortgage performance in March, including the distribution of 159 million stimulus payments totaling more than $376 billion.
- The report shows that March saw the largest single-month improvement in delinquencies in 11 years.
- 217,000 homeowners became past due on their mortgages in March, the lowest such delinquency inflow of any month on record.
- At the same time, cures spiked in the month as a variety of calendar and economy-driven factors resulted in the second-largest delinquency rate decline ever recorded
- The number of loans 30 days past due fell 34% from February and 50% from the same time last year to hit an all-time low, with 60-day delinquencies below pre-pandemic levels and near record lows as well
- Despite expected seasonal headwinds associated with the month, Black Knight’s McDash Flash daily performance dataset shows strong early mortgage payment activity in April
- Through April 23, 91.6% of mortgage holders had made their mortgage payments, up from 91% in March and the largest share for any month since the onset of the pandemic
- It indicates that another improvement in overall delinquent loan volumes is likely to be seen when month-end data is reported in mid-May
US Housing Foreclosure Statistics 2021
ATTOM Data Solutions, licensor of the nation's most comprehensive foreclosure data released its March 2021 U.S. Foreclosure Market Report. March was the second consecutive month with month-over-month increases in U.S. foreclosure activity. Although the foreclosure moratorium on government-backed loans has put a halt on foreclosure activity the mortgage servicers have been able to begin foreclosure actions on vacant and abandoned properties.
That's the reason for this slight uptick. The main reasons for a massive drop in foreclosure activity as compared to the previous year are the moratorium and “CARES Act” mortgage forbearance program, which have effectively prevented millions of seriously delinquent loans from entering the foreclosure process.
In the first quarter of 2021, lenders started the foreclosure process on 17,652 U.S. properties, up 3 percent from the previous quarter but down 78 percent from a year ago. Nationwide 1 in every 4,078 housing units had a foreclosure filing in Q1 2021. 7,320 properties were repossessed for nonpayment of mortgages through foreclosure (REO), up 14 percent from the previous quarter but down 87 percent from a year ago.
March 2021 Foreclosure Activity Takeaways
- Nationwide 1 in every 11,568 housing units had a foreclosure filing in March 2021.
- 6,418 U.S. properties started the foreclosure process in March 2021, up 7 percent from the previous month but down 77 percent from March 2020.
- Lenders completed the foreclosure process on 1,576 U.S. properties in March 2021, up 2 percent from the previous month but down 83 percent from March 2020.
- States with the highest foreclosure rates in March 2021 were Delaware (one in every 5,037 housing units with a foreclosure filing). Illinois (one in every 6,119 housing units); Indiana (one in every 6,275 housing units); Ohio (one in every 6,569 housing units); and Florida (one in every 6,763 housing units).
The following states had the highest foreclosure rates in March 2021:
- Delaware (one in every 5,037 housing units with a foreclosure filing)
- Illinois (one in every 6,119 housing units)
- Indiana (one in every 6,275 housing units)
- Ohio (one in every 6,569 housing units)
- Florida (one in every 6,763 housing units)
The following states saw the greatest quarterly increase in foreclosure starts:
- California (up 36 percent)
- Ohio (up 25 percent)
- North Carolina (up 15 percent)
- Virginia (up 11 percent)
- South Carolina (up 10 percent)
The following states had the highest number of REOs in Q1 2021:
- Florida (945 REOs)
- Illinois (610 REOs)
- California (414 REOs)
- Texas (370 REOs)
- Arizona (330 REOs)
Will The Housing Market Crash: What Do Recent Trends Forecast?
The US housing market is far from crashing in 2021 or 2022. In fact, it continues to play an important supportive role in the country’s economic recovery. Current economic conditions resemble a “swoosh” pattern, with the initial impact from the lockdown followed by a gradual recovery as the economy reopens.
Mortgage rates and slow but steady improvements to the job landscape continue to propel confidence for first-time buyers. The pace of existing-home sales has jumped to a level not seen since 2006 and, importantly, was followed by strong pending sales, purchase mortgage applications, and construction data.
The U.S. economy is expected to grow 6.8 percent in 2021, up from a prior 6.6 percent, on a fourth quarter-over-fourth quarter basis, according to the latest forecast from Fannie Mae's Economic and Strategic Research (ESR) Group. Their 2022 forecast remains unchanged at 3.0 percent. Economic growth rebounded sharply in March following a weather-related pullback in February.
Growth has been supported by waning COVID-19-related restrictions as the vaccination effort progresses, as well as a bolstering of household incomes from the latest stimulus bill. Uncertainty remains over the speed and duration of the current leg of the recovery, but we continue to anticipate a brisk acceleration in the near term, with growth in the second quarter expected at 9.1 percent annualized.
Housing activity is expected to remain strong in 2021, but the growth will likely decelerate from the torrid pace set in the second half of 2020. While the ESR Group expects home sales to rise 6.2 percent in 2021, the monthly pace is likely to slow through much of the year.
Low-interest rates are also an inducement to buy homes, but slow supply growth continues to result in high levels of home price appreciation, which is offsetting some of the affordability benefits of the lower rate environment. Consistent with strong demand and limited supply, home price appreciation is predicted to be 8.0 percent in 2021 (previously 4.2 percent).
As Federal Reserve has made clear that it has no intention of raising interest rates soon, many households are seizing the opportunity to refinance their existing mortgages. However, additional uncertainty surrounds the timing and implications of the end of the forbearance policies, which provide a temporary pause in mortgage payments to provide relief for those who might be struggling financially for whatever reason.
The question that everyone in the industry is asking right now is that how those might impact the number and nature of home sales. What are foreclosures going to look like once the foreclosure moratoria and forbearance programs come to end? A primary difference this time is that homeowner equity is at an all-time high: over $6.5 trillion. According to RealtyTrac’s parent company ATTOM Data, about 70% of homeowners have more than 20% equity.
According to Fannie Mae, the continued improvement in the labor market and higher levels of home equity will likely help limit distressed sales in 2021. So, this record level of homeowner equity means that as foreclosure moratoria eventually expire, the overwhelming majority of distressed assets are likely to be sold well before the foreclosure auction.
Fannie Mae's conducts a monthly national housing survey to find out the percentage of respondents who think it’s a ‘good/bad time to sell a home’ vs those who think it's a ‘good/bad time to buy a home. The Fannie Mae Home Purchase Sentiment Index® (HPSI) remained relatively flat in May, increasing by 1.0 points to 80.0. Four of the HPSI’s six components increased month over month, most notably the components related to personal finance, as consumers reported a much greater sense of job security and improved household income compared to the same time last year.
According to national public opinion, it’s not a good time to buy a home. Consumer responses to the survey indicate decreasing optimism about homebuying conditions. The ‘good time to buy’ component fell further, hitting another all-time survey low, as consumers appear to be acutely aware of higher home prices and the low supply of homes, the two reasons cited most frequently for that particular sentiment.
- Good/Bad Time to Buy: The percentage of respondents who say it is a good time to buy a home decreased from 47% to 35%, while the percentage who say it is a bad time to buy increased from 48% to 56%. As a result, the net share of those who say it is a good time to buy decreased 20 percentage points month over month.
- Good/Bad Time to Sell: The percentage of respondents who say it is a good time to sell a home remained unchanged at 67%, while the percentage who say it’s a bad time to sell decreased from 26% to 25%. As a result, the net share of those who say it is a good time to sell increased 1 percentage point month over month.
The Federal Reserve Bank of New York's Center for Microeconomic Data released the March 2021 Survey of Consumer Expectations, which shows a continuation in the recent upward trend in inflation, home price, and spending growth expectations. Finally, households were more positive about their current and expected financial situation and their ability to access credit.
Median year-ahead home price change expectations increased 0.8 percentage points to 4.8% in March, a new series high. The increase was driven mostly by respondents who live in the “West” and “Midwest” Census regions. Median inflation expectations at the one-year and three-year horizons both increased 0.1 percentage point in March to 3.2% and 3.1%, respectively. Inflation expectations at both horizons have increased steadily over the past five months and they are now at their highest since mid-2014.
It also shows that mean unemployment expectation — or the mean probability that the U.S. unemployment rate will be higher one year from now — decreased from 39.1% in February to 34.4% in March, the lowest level since the start of the pandemic. The mean perceived probability of losing one's job in the next 12 months decreased from 14.2% in February to 12.8% in March, the lowest reading in almost three years. The median expected growth in household income increased by 0.4 percentage point to 2.8% in March, the highest level since January of last year.
Zillow's forecast predicts annual home value growth will rise as high as 13.5% by mid-2021, and for home values to end 2021 up 10.5% from their current levels. For now, there are no indications that price growth is going to slow. According to Zillow's market pulse report dated April 16, 2021, housing market sentiment improved in March. While demand for housing remains red hot, supply-side constraints that have hindered homebuilders for years have recently become even more acute. Home construction figures rose strongly in March to new pandemic-era highs.
- Many consumers were assisted by $1,400 federal stimulus checks sent in March 2021.
- As fiscal stimulus works its way through the economy, consumers show an increased eagerness to spend and demonstrate more confidence in the economy’s future.
- Seasonally adjusted U.S. retail business sales rose 9.8% in March from February.
- Homebuilders were quick to ramp up production and regain the form that has been powering activity at a rate not seen since before the Great Recession.
- March housing starts rose 19.4% from February and 37% from a year ago to 1.739 million (SAAR).
- Building permits rose to 1.766 million, up 2.7% from February and 30.2% from March 2020.
- As encouraging economic data continue to mount, the rise in mortgage rates has stalled.
- The rate on a 30-year fixed-rate mortgage retreated this week to its lowest level in a month.
- Seasonally adjusted for-purchase mortgage applications fell 1% from the previous week.
- The outlook for mortgage rates is likely still upward, barring any additional setbacks in the nation’s recovery from the pandemic.
Realtor's Recovery Index Shows No Housing Sales or Price Crash in 2021 or 2022
According to Realtor.com's last and final recovery report, the Housing Market Recovery Index reached 101.6 nationwide, up 0.5 points compared to the previous week. Close to one year since the outset of the pandemic and the housing market continues to display its resiliency.
- The overall index remains above the pre-COVID baseline, with all measures growing faster than this time last year, except for new listings.
- The ‘housing supply’ component of the index increased by 0.3 points over the previous week, improving marginally but still the lowest recovery indicator in their index.
- Locally, a total of 32 markets have remained above the recovery benchmark, three more than the previous week.
- Eighteen markets now remain below the recovery pace, at least temporarily.
- The overall recovery index is showing the greatest recovery in Austin, Denver, Riverside, Portland, and Phoenix.
- The buyer demand remains strong in 43 of the 50 largest markets as they are still positioned above the recovery trend.
- In the ‘home price’ component, 34 of the 50 largest markets are seeing growth in asking prices surpass the pre-COVID baseline, two less than the previous week.
- In the ‘pace of sales’ component, 42 of the 50 largest markets are now seeing the time on market index surpass the pre-COVID baseline, five more than the previous week.
- The most recovered markets for time-on-market include Riverside, Denver, Phoenix, Los Angeles, and Austin, with a pace of sales growth index between 147 and 162.
- In the ‘housing supply’ component, only 9 of the 50 largest markets saw the new listings index remain above the January 2020 baseline, one less than the previous week.
- The markets which are seeing newly listed homes grow most quickly compared to baseline are San Jose, Denver, San Francisco, Los Angeles, and San Diego.
- The markets seeing newly listed homes declining most compared to baseline include Chicago, Hartford, Raleigh, Virginia Beach, and Oklahoma City.
|Week ending 3/6/2021||Current Index||w/w Change|
|Overall Housing Recovery Index||101.6||+0.5|
|Housing Demand Growth Index||116.8||-1.0|
|Listing Price Growth Index||110.6||+0.3|
|New Supply Growth Index||81.4||+0.3|
|The pace of Sales Index||107.5||+1.3|
The graph below charts the index by showing how the real estate market started strong in early 2020, and then dropped dramatically at the beginning of March when the pandemic paused the economy. It also shows the strength of the recovery since the beginning of May.
The housing index is pegged to a starting point of 100 at a particular year. And then they can just track whether things are improving or declining from that reference point. It’s similar to any other index where you have a starting point or a starting year and you peg it at a hundred and it just goes up and down from there.
It went up for most of March, and then it hit this peak and came down rapidly and fast over the course of essentially the end of March, April, and right through to the beginning of May where it bottomed out. 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.
By May, the number of homebuyers searching online on realtor.com rebounded to 37% higher than the previous year. This surge in demand developed into a surprisingly competitive fall and winter homebuying season. The recovery index had reached 106.6 nationwide for the week ending July 18, bringing the index above the pre-COVID recovery benchmark for the first time since March, and then it kept going up from there till Dec 26.
In August 2020, the listing price reached double-digit growth for the first time since late 2017. During this time, we saw housing demand increase in areas across the country, but suburban markets became hotter than their urban counterparts as homebuyers searched for more space away from crowded urban centers.
In early January, political unrest captured the nation’s attention and this was reflected through a dip in online home shopping growth and another decline in the growth of new listings after a near recovery last fall. Just when the market began to gear up once again, the chilling weather conditions stalled the housing market in most impacted areas.
The overall housing recovery index fell sharply by 14.1 points and reached below the pre-COVID benchmark on Jan 2, 2021. It was the first major decline that we have seen since April 2020. The year-over-year growth rate in newly listed homes also fell during January and February compared to last fall and December and hasn’t significantly recovered since.
The final report shows that the overall index has formed a small V-shaped curve back again by reaching 101.6 points as of March 6, 2021. More recently, rising interest rates have notably decelerated growth in mortgage applications. While still higher than last year, the year-over-year growth rate in purchase mortgage applications has declined from 15% year-over-year several weeks ago, to just 1% year-over-year this past week. This signals a potential rebalancing of the housing market, as rising rates cool the demand. If more sellers or more new construction can also improve the inventory crunch over the coming months, this spring may see an easing of the tight market conditions present since last summer.
Hottest Housing Market in 2021: Sales And Price Growth Forecast
Realtor.com’s top 10 housing markets for 2021 have substantial momentum from 2020 which they will carry into 2021. The tech hubs and state capitals will lead the pack for home price appreciation and sales growth. These metros are in a prime position to see an uptick in home sales and rising prices.
Low mortgage rates throughout most of the year help these markets see price and sales growth on top of 2020’s high levels. Economic momentum from the thriving tech industry, coupled with healthier levels of supply, will position these markets for growth in 2021.
Home prices across these top 10 markets are forecasted to increase by 6.9 percent and sales by 13.1 percent year-over-year. Sacramento ranks number one for 2021 with a median home price of $554,000. Sacramento home prices are predicted to increase by 7.4 percent while sales will increase by 17.2 percent.
San Jose ranks at #2 where the median home price is expected to rise 10.8 percent in 2021. Harrisburg, Pennsylvania came in at No. 7 on the list. Its relative affordability will boost the sales by 14% in 2021 while the median will grow at a modest rate of 3.8%.
Rental Housing Market Trends & Statistics 2021
The rental market appears poised to turn the corner and demand for rental units is expected to surge in 2021. While rising rents is a good sign for rental property owners, it will certainly put millions of renters hit hard by pandemic-related income loss in an even more difficult position, and further government intervention will likely be needed to avoid a painful wave of evictions. In general, there are some significant early signs of trend reversals from what the rental market saw throughout the majority of 2020.
These shifts, however, don’t come as a total surprise, as the rental market tends to pick up in the New Year after the holiday season. Below you'll find various rent reports that highlight year-over-year rent trends and price fluctuations that renters may be experiencing in various parts of the United States. We highlight a few takeaways from multiple sources having an impact on the overall rental market.
The multifamily industry continues to face steep challenges brought in by the pandemic. The federal government has included $50 billion as rental assistance as well as other support for apartment residents in the recently passed COVID relief package. The National Multifamily Housing Council (NMHC)’s Rent Payment Tracker found 80.0 percent of apartment households made a full or partial rent payment by May 6 in its survey of 11.7 million units of professionally managed apartment units across the country.
This is a 0.1 percentage point decrease from the share who paid rent through May 6, 2020, and compares to 81.7 percent that had been paid by May 6, 2019. This data encompasses a wide variety of market-rate rental properties across the United States, which can vary by size, type, and average rental price.
This is a 2.5 percentage point, or 294,224 household decrease from the share who paid rent through January 20, 2020, and compares to 89.8 percent that had paid by December 20, 2020. These data encompass a wide variety of market-rate rental properties across the United States, which can vary by size, type, and average rental price.
June 2021 Apartment List National Rent Report gives the clearest indication yet that rent prices are rebounding in markets across the country. Apartment List's national index increased by 2.3 percent from April to May, representing the third straight month of record-setting rent growth. The year-over-year rent growth now stands at 5.4 percent nationally. In March, prices had rebounded to their pre-pandemic levels. In April, rent growth hit a new milestone.
- The most expensive markets have gotten somewhat more affordable, while the most affordable markets have grown pricier.
- Rents in tech centers like San Francisco are 17 percent lower than they were in March 2020, but the city has seen prices increase by 13 percent over just the past four months.
- 9 of the 10 cities with the sharpest year-over-year declines have now had four consecutive months of rising rents.
- There's a sharp rebound back to positive rent growth, with monthly increases larger than what was typical pre-pandemic.
- Four of these cities — San Jose, Washington, D.C., Boston, and Minneapolis — have seen rents increasing for five consecutive months.
- Mid-size markets are continuing to boom.
- Boise continues to rank #1 for fastest year-over-year growth.
- Boise saw rents jump by a staggering 6.6 percent just this month and are up 31 percent since the start of the pandemic.
- Remote work and the economic fallout of the pandemic will undoubtedly continue to impact local rental markets going forward.
Apartment Guide’s May 2021 Rent Report highlights year-over-year rent trends and price fluctuations that renters may experience in various parts of the United States. They compare rent prices for the studio, one-bedroom, two-bedroom, and three-bedroom apartments to determine which unit types and which of the country's most populated cities are becoming more affordable or more expensive for renters.
The report shows all unit types reflect price increases since last month, possibly reflecting growing demand. Every unit type is also up year-over-year except for studio apartments. These numbers appear to reflect a strong interest in multi-family housing, possibly fueled in part by current levels of demand and competition among home buyers.
- 0-BR: $1,630 (+1.7 percent from prior month / -2.0 percent year-over-year)
- 1-BR: $1,663 (+3.3 percent from prior month / +4.4 percent year-over-year)
- 2-BR: $1,934 (+2.8 percent from prior month / +5.0 percent year-over-year)
- 3-BR: $2,069 (+1.6 percent from prior month / +4.1 percent year-over-year)
As we look at what rent prices are doing from state to state, you see that both studio apartments and three-bedroom units reflect a close-to-even split between states facing upward and downward pressure on rent prices.
- 0-BR: 51 percent of states are up and 49 percent are down
- 1-BR: 67 percent of states are up and 33 percent are down
- 2-BR: 79 percent of states are up and 21 percent are down
- 3-BR: 50 percent of states are up and 50 percent are down
Three cities in the top 10 have experienced year-over-year price increases in both one-bedroom and two-bedroom apartments:
- Henderson, NV
- Las Vegas, NV
- Virginia Beach, VA
Four cities in the top 10 have experienced year-over-year price decreases in both one-bedroom and two-bedroom apartments:
- Garland, TX
- San Antonio, TX
- San Jose, CA
- Seattle, WA
The following cities have experienced the biggest increases in one-bedroom rent prices year-over-year. None of them make the 10 most expensive markets for one-bedroom apartments by rent prices. Only one — Winston-Salem, NC — has a population of 300,000 or less.
- Las Vegas, NV (+44 percent)
- Virginia Beach, VA (+32 percent)
- Mesa, AZ (+25.3 percent)
- Winston-Salem, NC (+21 percent)
- Columbus, OH (+20.4 percent)
- New Orleans, LA (+19.5 percent)
- Aurora, CO (+19.3 percent)
- Henderson, NV (+16.6 percent)
- Kansas City, MO (+16.4 percent)
- Jacksonville, FL (+15.7 percent)
April 2021 Data by Realtor.com shows that rents seeing the largest year-over-year growth since March 2020. Rent declines in high-tech hubs have found their bottom and are starting to recover. In April, rents in large tech cities were down 5.4% year-over-year, an improvement from the 6.6% decline earlier this year, and its highest point in four months. If tech city recovery continues at this pace, rent growth could reach pre-COVID levels this fall.
- Nationally, 2-bed units have surpassed their pre-COVID growth rates, reaching $1,662, up 5.2% year-over-year.
- In March 2020, 2-bed rents were growing 3.5% year-over-year.
- April 2021 data: In the 50 largest metros, the median rent was $1,483, up 2.7% year-over-year, the fastest growth since March 2020
- Rents by size: Studio: $1,217, down 1.9% year-over-year; 1-bed: $1,382, up 3.0%; 2-bed: $1,662, up 5.2%.
- 2-bed units have surpassed their pre-COVID levels of rent growth. In March 2020, rents were growing 3.5% year-over-year; this month, rents were up 5.2%.
- Riverside was the fastest-growing metro area, with the median rent reaching $1,950 in April, up 15.0% year-over-year.
- The other metros topping the list of fastest-growing rents were Sacramento, CA; Memphis, TN; and Tampa, FL, which all saw rents growing by over 12% compared to last year.
- As home prices hit record highs and affordability becomes an issue for potential homebuyers, the appetite for rentals may rise as would-be buyers opt for renting.
Among the 50 Largest Metropolitan Areas, these are the top 10 metros that saw the largest rent increases in April 2021. The median rent in major tech centers was $2,086, down just 5.4%, its highest position in four months. The Riverside-San Bernardino-Ontario, CA saw the highest growth in rents in April, up 15% year-over-year to $1,950.
Among the 50 Largest Metropolitan Areas, these are the top 10 metros that saw the largest rent declines in April 2021. In the heart of Silicon Valley, the San Jose-Sunnyvale-Santa Clara, CA metro area saw the steepest declines in rents in April, down 12.5% year-over-year to $2,685.
Zumper's National Rent Report (April 2021), shows rental market trends could reverse rapidly in the coming months. After vaccination, many people may consider moving back to expensive, coastal markets, which could increase prices in these places after a year of historic decreases.
- The rapid declines of 2020 have ceased and rents have started to grow again.
- Nationally, rents growth split between 1- and 2-bedroom units in April.
- 1-bedroom median rent was down 0.2% to $1245 while the 2-bedroom median was up 0.7% to $1524.
- In year-over-year terms, the 1-bedroom median is up 2.1% while the 2-bedroom median is up 3.4%.
- At present, rents in the country’s 8 most expensive real estate markets have been growing at a very similar rate to 2019.
- As a result, the expensive markets could remain discounted through 2022 given they are between 10-25% cheaper than they were in 2020.
- Not every expensive rental market is rebounding yet.
- Two out of the three major Bay Area cities saw rents decline more in April after a quarter of near-zero change.
- This shows that renters might not be willing to move into the expensive tech hubs when cheaper, metropolitan options are still available.
- Rents in historically cheaper cities throughout the Midwest and Southwest are up considerably from a year ago.
- Rents are up the most in southeastern markets outside the DC area.
- Laredo, TX saw 1-bedroom median rent increase the most from the month prior, up 5.6% to $750, and ranked as the 91st most expensive rental market.
- Colorado Springs, CO had the largest decrease in 1-bedroom median rent from the prior month at -5.4%.
RESIDENTIAL VACANCIES AND HOMEOWNERSHIP RATES
Vacancy rates affect the price of housing. In a market in which there are a lot of vacant homes or apartments, prospective tenants or buyers are at an advantage. On the other hand, in a market in which vacant homes or apartments are scarce, the power dynamic is reversed. The landlords (or sellers) are in a position to tend to bid up the rents.
Therefore, when there is an unusually low vacancy, the price of housing will tend to be bid up over time. When there is an unusually high vacancy, the price of housing will tend to be bid down over time.
Let us see how this pandemic-led economic slowdown has impacted the vacancy rates nationally as well as regionally. The vacancy rate is somewhat analogous to the unemployment rate. If the unemployment rate increases, it has a direct impact on vacancy rates, just as what happened this year since March.
COVID-19 continues to limit economic activity, yielding higher apartment vacancies, and lower overall rent growth. The Census Bureau reports rental vacancy and homeownership vacancy rates each year through its American Community Survey; you can get these at the city level or in some cases for even more fine-grained areas.
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%. In the fourth quarter of 2020, the national vacancy rates were 6.5 percent for rental housing and 1.0 percent for homeowner housing. Approximately 89.1 percent of the housing units in the United States in the fourth quarter of 2020 were occupied and 10.9 percent were vacant. Owner-occupied housing units made up 58.6 percent of total housing units, while renter-occupied units made up 30.4 percent of the inventory in the fourth quarter of 2020.
It is interesting to see that the rental vacancy rate of 6.5 percent was not statistically different from the rate in the fourth quarter of 2019 (6.4 percent) and not statistically different from the rate in the third quarter of 2020 (6.4 percent). And the homeowner vacancy rate of 1.0 percent was 0.4 percentage points lower than the rate in the fourth quarter of 2019 (1.4 percent) and not statistically different from the rate in the third quarter of 2020 (0.9percent).
On the other hand, the homeownership rate of 65.8 percent was 0.7 percentage points higher than the rate in the fourth quarter of 2019 (65.1 percent) and 1.6 percentage points lower than the rate in the third quarter of 2020 (67.4 percent).
Usually larger metro areas have an advantage when it comes to rental properties. They have an abundant supply of renters in the high-income bracket with more disposable income who are willing to compete for the best apartments and rentals. However, industry experts are seeing more positive conditions in many suburban markets.
Buyers of apartment properties are returning to the market, spurred by historically low interest rates and increased equity financing availability. In the fourth quarter of 2020, the rental vacancy rate was the highest in Metropolitan Statistical Areas (7.0) percent. Also, it was not statistically different principal cities (7.0 percent).
But suburbs had the lowest rental vacancy rate of 5.6 percent, 1.4 percentage points lower than principal cities. According to The New York Times, an estimated 5% of New York City residents and 18% of Manhattanites alone left the city between March and May. Suburbs like Westchester, Long Island, and North Fork have become other popular sanctuaries inside New York State.
This combination of high demand and low supply has driven prices higher in the suburbs. As affluent New Yorkers are buying houses in suburbs, the real estate market in those areas has prospered.
The fourth quarter 2020 rental vacancy rate was lowest in the West (4.7 percent), followed by the Northeast (5.7 percent). Rates were higher in the Midwest (7.8 percent) and South (7.4 percent), but not significantly different from each other.
The rental vacancy rate in the South was lower than the fourth quarter 2019 rate, while the rental vacancy rates for the Northeast, Midwest, and West were not statistically different from the fourth quarter 2019 rates.
The fourth quarter 2020 homeowner vacancy rate was lowest in the West (0.6 percent). Rates in the Northeast, Midwest, and South were not statistically different from each other. The homeowner vacancy rates in the Midwest, South, and West were lower than the fourth quarter 2019 rates, while the rate in the Northeast was not statistically different.
As you read further, we have collected some data from credible sources that show how the US housing market is recovering week after week from the blows of the pandemic.
Housing Market Forecast 2021 & 2022: Will This Bubble Burst?
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. The housing market has been along for much of the ride and continues to benefit greatly from the overall health of the economy. However, hot economies eventually cool and with that, hot housing markets move more towards balance.
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. We saw some of the best home sales and housing starts to pace in more than a decade until February 2020.
While home prices never declined, they were flat on a year-over-year basis in April 2020, and in May 2020 homes took more than two weeks longer to sell compared to the previous year. As buyer interest rebounded, however, home prices began to climb and sales began to quicken such that by summer homes were selling as quickly as they had the year before, and home prices were growing by high single-digits on their way to double-digit pace.
Before the COVID-19 pandemic, Realtor.com's national housing forecast for 2020 was that home price growth will flatten, with an expected increase of 0.8 percent. Inventory was predicted to remain constrained, especially at the entry-level price segment. Mortgage rates were predicted to likely bump up to 3.88 percent by the end of the year.
Buyers were expected to continue to move to affordability, benefiting smaller and mid-sized markets. 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.
After the coronavirus pandemic came into being, the housing market forecast runs the gamut from optimistic to pessimistic. The fall in GDP associated with the coronavirus pandemic, and the rise in unemployment, was unprecedented. As the number of coronavirus cases grew and lockdowns began taking effect across the United States, real estate activity slowed dramatically. Both buyers and sellers pulled back from the housing market.
According to Zillow, after the third week of March, newly pending sales dropped each week through mid-April, hitting a low of 38.8% below 2019’s figures in a time period when sales usually heat up. Time on the market grew to three days longer than last year in early May, while list price appreciation fell to just 0.1% above 2019.
Year-over-year rent growth in the U.S. saw the biggest one-month slowdown in at least five years. About 3 million adults moved in with their parents or grandparents in April, bringing the number of adults living at home to the highest number on record.
Despite all of that, there were no signs that the housing market is about to subside. The housing market absorbed the shock relatively quickly and began to recover. Pent-up demand that was put on hold was unleashed starting in late April, then supercharged by even lower mortgage rates and changes in housing needs.
Annual growth in median sale prices peaked at 7.4% the second week of April, before plummeting in the early days of the market freeze and falling to 0.8% by late May. But after the freeze began to thaw, year-over-year growth rose sharply and steadily, hitting new highs of 13.8% by late October, according to Zillow's data.
Before the pandemic hit the nation the supply of new housing was failing to keep up with demand. Although buyers were eager to close on houses, sellers were not so anxious to list their houses. Inventory was low compared to 2019 to start the year, and that gap widened nearly every week through early December.
Due to a very tight inventory, coupled with strong demand from first-time buyers, the housing market began to move incredibly fast. Sellers who did choose to list had little trouble finding motivated buyers who were looking to take advantage of low-interest rates. After peaking in early May, time on the market began to fall through early November as available homes for sale were scooped up faster.
According to Zillow, in September 2020, one in five houses sold above list price – about 50% more than long-term norms. Houses’ typical time on the market reached down to 12 days in October — selling at blazing speeds regardless of price. By November, home values had risen 1.1% since October and 3% since the previous quarter — the largest monthly and quarterly gains in Zillow records going back to 1996.
Inventory declined every week starting in early June – by the week ending Dec. 12, it was 34.3% below 2019 levels. As of the week of Dec. 12, houses were typically on the market a median of just 16 days before an offer was accepted — up a handful of days from lows set in earlier weeks, but still a full three weeks (21 days) less than the same time last year.
Zillow expected that 5.7 million existing homes will be sold by the end of 2020, up 5.9% from 2019. This prediction turned out to be true. 2020 was a record-breaking year in residential real estate. But while 2020 will end up being a strong year for the housing market by most measures, it will pale in comparison to 2021.
Zillow predicts that almost 6.9 million existing homes will be sold in the calendar year 2021, the most sales recorded in a single calendar year since 2005 and the largest one-year increase (21.9%) since the early 1980s. According to some experts, the economic cost we’ve paid to try to contain the virus will weigh down the economy into 2021. That is why home sales are expected to be around six million in 2021 instead of the previously projected 6.3 million.
Economic sentiment affected the U.S. housing market, too. People were reluctant or unable to show their homes, while others are afraid it won’t sell and thus didn’t list their homes at all. Recovery is also expected to be uneven. Housing markets that are more heavily impacted should expect a slower recovery than markets that were hit less severely.
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 mismatch between supply and demand is driving prices higher, but this isn't a housing bubble. Economic sentiment affected the U.S. housing market, too.
Many experts were predicting that the pandemic could lead to a housing crash worse than the great depression. But that's not going to happen. The market is in much better shape than a decade ago. The housing market is well past the recovery phase and is now booming with higher home sales compared to the pre-pandemic period.
Let’s first look at one of the most talked-about negative housing forecasts for 2021 — The rising mortgage delinquencies and their impact on the housing market in 2021? MBA forecasts that the refinance boom will surge in March and then drop by 54% by the second quarter of 2021.
Delinquencies at the end of 2019 were at their lowest level since 1979. That turned around quickly with the pandemic and spike in unemployment. It is important to note that foreclosure activity is increasing despite the various foreclosure moratoria that are in place. Mortgage delinquencies and foreclosures increased in August and October, respectively. 1.2% of loans are at least 150 days past due according to CoreLogic.
ATTOM reported that foreclosures increased by 20% in October. The increased long-term delinquency is due to participation in forbearance programs, and foreclosures are down 80% year-over-year. South Carolina, Nebraska, and Alabama post the highest state foreclosure rates
According to RealtyTrac's October 2020 U.S. Foreclosure Market Report, there were a total of 11,673 U.S. properties with foreclosure filings — default notices, scheduled auctions, or bank repossessions — in October 2020, up 20 percent from a month ago but down 79 percent from a year ago. South Carolina, Nebraska, and Alabama post the highest state foreclosure rates.
Big metropolitan statistical areas are having the highest foreclosure rates. Almost all of the metro areas where foreclosure activity increased on a month-over-month basis are also places where unemployment rates are higher than the national average, and in many cases have been hotspots of COVID-19 infections.
According to third-quarter 2020 research released by the Mortgage Bankers Association's Research Institute for Housing America, over 6 million households did not make their rent or mortgage payments and 26 million individuals missed their student loan payments in September 2020.
During the third quarter, the percent of homeowners and renters behind on their payments decreased slightly from the second quarter, but the overall amount remains high. In September, 8.5% of renters (2.82 million households) missed, delayed, or made a reduced payment, while 7.1% (3.37 million homeowners) missed their mortgage payments.
Student debt borrowers rose from 3% at the beginning of April to 8% by the end of September. The millions of student debt borrowers behind on their payments also have future ramifications for the housing markets. In aggregate, rental property owners lost as much as $9.2 billion in third-quarter revenue from missed rent payments.
Why is there a negative housing market forecast for 2021 amidst the ongoing boom? At the moment, the foreclosure moratoriums have kept lenders from being able to even start their processing of defaults. One of the negative housing predictions is that the supply in the form of foreclosed homes may overwhelm the demand by many folds in 2021. The result would be that prices are going to plummet again and the real estate sector will likely cool off.
The major effect will be seen in the summer of 2021 because foreclosure that starts today will probably not be processed until mid of 2021. It will be well into 2021 before you will see a spike in single-family and condo foreclosures. First of all the mortgage forbearance must end. Then the backlog of prior foreclosure and eviction cases must be cleared before a wave of new ones can be processed. This creates an incredible buying opportunity in the local housing markets if you can secure funding or have the cash to start buying once this inventory hits the market.
The lack of homes for sale means rental demand should recover alongside the economy, and yields will ease back over 2021 and 2022. However, renters hurt financially by the pandemic will continue to struggle, and rental assistance by the government is needed. Now, we won’t speculate too much about the impending wave of foreclosures and would rather focus on the current housing indicators and their recovery from the lows caused by the pandemic.
Real estate activity has been going on at an unusual pace. The housing sales recovery is strong, as buyers are eager to purchase homes and properties that they had been eyeing during the shutdown. In 2021, interest rates are expected to remain low but would increase gradually. The home prices will continue to appreciate double-digits.
As the population of millennials is increasing, the demand side of housing remains strong. Many buyers need to get into a larger home because they have a growing family. Those interested in purchasing homes are looking at the enticing low mortgage rates.
Housing inventory will remain low, despite plenty of new construction the number of homes for sale would still fall well short of demand in 2021. Buyers will stay focused on the suburbs. We can expect a wave of mortgage refinances to save money.
According to N.A.R, an increasing gap between supply and demand will cause home prices to increase and we can expect further upward pressure on prices for the foreseeable future.
NAR Chief Economist Lawrence Yun continues to project that 2021 will bring about strong economic growth, supported by low mortgage rates and fiscal stimulus, which in turn will bolster existing-home sales. According to Yun, with rates to remain low, existing-homes sales are projected to rise by 10% in 2021 to reach 6.2 million in 2021, while the median home price is anticipated to increase by 9% in 2021 to $323,900. Housing starts are forecasted to reach 1.6 million in 2021 and 1.7 million in 2022, providing much-needed relief to the housing inventory deficit.
Realtor.com's latest housing market forecast for 2021 shows that the housing boom will continue but the seasonal trends will normalize.
- Spring and summer home-buying seasons in 2021 will be strong.
- The existing home sales will increase by 7 percent in the year 2021.
- The rise of millennials will push the housing demand up.
- Home prices will hit new highs, even though the pace of growth slows.
- There would be no double-digit price gains.
- The home prices will appreciate by 5.7%.
- Single-family housing starts are now predicted to increase by 9 percent.
- Low mortgage rates will keep purchasing power healthy, but monthly mortgage costs will rise as mortgage rates steady and home prices continue to rise.
- Mortgage rates will remain low with an average of 3.2% throughout the year.
- Buyers seeking affordability and space will drive interest in the suburbs.
- The pandemic has merely accelerated this previous trend by giving homebuyers additional reasons to move farther from downtown.
- Sellers will get top dollar for their homes.
- Fast sales will remain the norm in many parts of the country which will be a challenge felt particularly for first-time buyers
|Housing Indicator||Realtor.com 2021 Forecast|
|Mortgage Rates||Average 3.2% throughout the year, 3.4% by end of year|
|Existing-Home Median Sales Price Appreciation||Up 5.7%|
|Existing-Home Sales||Up 7.0%|
|Single-Family Home Housing Starts||Up 9%|
According to Zillow, the housing market forecast for 2021 has improved but lingering economic uncertainty may temper some of the predictions.
The forecasts for seasonally adjusted home prices and pending sales are more optimistic than previous forecasts because sales and prices have stayed strong through the summer months amid increasingly short inventory and high demand.
The pandemic also pushed the buying season further back in the year, adding to recent sales. 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.
- Home sales will remain near their current, elevated levels well into 2021.
- Sales volumes overall are forecasted to remain higher than pre-pandemic levels throughout this year and next.
- 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.
- Growth is then expected to resume next spring and to remain firmly above pre-pandemic volume through most of next year.
- This short-term deceleration in sales volume can be attributed in large part to an expected slowdown in GDP growth, the fading impact of historically low mortgage rates, fewer sales occurring that were deferred from earlier this year, and historically low levels of for-sale inventory.
- An expected reacceleration of GDP growth in 2021 should help push sales volumes higher.
- The home price forecast has been adjusted to higher for 2021.
- 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.
- The previous forecast predicted a 3.8% increase in home prices over this time frame.
WHICH WERE THE HOTTEST REAL ESTATE MARKETS in 2020?
According to Realtor.com's Market Hotness Index, measuring time-on-the-market data and listing views per property, the east coast accounts for seven of the top 10 zip codes, with a focus on the northeast region. Although these markets were hit by the COVID-19 pandemic first, they were also some of the first to recover, with caseloads easing over time.
The resulting pent-up demand has driven homebuyers back to these markets, but now with an increasing preference for neighborhoods outside of the dense city centers and more toward suburban areas. Affordability continues to be a key factor in attracting buyers to these neighborhoods.
The median listing price in the hottest zip codes was $335,000, up 1.8 percent year-over-year. However, these prices were 15 percent cheaper than their surrounding metros, on average, and essentially right in line with the national median price of $331,000 during the same period.
The top 10 zip codes follow the overall trend of homebuyers shifting their buying behavior in response to the pandemic by increasing their search toward less dense suburbs beyond urban city centers.
|The 2020 Hottest ZIP Codes in America by Realtor.com|
|Rank||Zip Code||Zip Name||Views Per Property Y/Y||Median Days on Market||Median Listing Price|
|1||80911||Colorado Springs, CO||38%||13||$287,000|
|5||4106||South Portland, ME||5%||21||$377,000|
Economic Recession & its Affect on Housing Market
The pandemic cost 22 million payroll jobs in March and April, and about 9 million have been recovered through July. Job openings were stalled, and other statistics indicated that the labor market was in the grips of recession. On August 27, 2020, the Labor Department said that the number of Americans applying for jobless benefits topped 1 million last week, just as it has most weeks since late March. That’s about four times the number of average weekly applicants before the pandemic.
But the stimulus package that Congress passed in March 2020 was more than double the financial aid offered during the Great Recession. The U.S. economy has been improving since the 3rd quarter of 2020 after the destruction caused by the COVID-19 pandemic. This positive outlook is based on the reviews of the key economic indicators, including gross domestic product (GDP), unemployment, and inflation.
Real gross domestic product (GDP) increased at an annual rate of 4.3 percent in the fourth quarter of 2020, reflecting both the continued economic recovery from the sharp declines earlier in the year and the ongoing impact of the COVID-19 pandemic, including new restrictions and closures that took effect in some areas of the United States, according to the “third estimate” released by the Bureau of Economic Analysis. The increase was 0.2 percentage points higher than the “second” estimate released in February. Current‑dollar GDP increased 6.3 percent at an annual rate, or $324.4 billion, in the fourth quarter to a level of $21.49 trillion.
In the third quarter, real GDP increased by 33.4 percent. The decline in second-quarter GDP reflected the response to COVID-19, as “stay-at-home” orders issued in March and April were partially lifted in some areas of the country in May and June, and government pandemic assistance payments were distributed to households and businesses. This led to rapid shifts in inactivity, as businesses and schools continued remote work, and consumers and businesses canceled, restricted, or redirected their spending.
GDP for 2020
Real GDP decreased 3.5 percent in 2020 (from the 2019 annual level to the 2020 annual level), compared with an increase of 2.2 percent in 2019. The decrease in real GDP in 2020 reflected decreases in PCE, exports, private inventory investment, nonresidential fixed investment, and state and local government that were partly offset by increases in federal government spending and residential fixed investment. Imports decreased.
The price index for gross domestic purchases increased 1.2 percent in 2020, compared with an increase of 1.6 percent in 2019. The PCE price index also increased 1.2 percent in 2020, compared with an increase of 1.5 percent. Excluding food and energy prices, the PCE price index increased 1.4 percent, compared with an increase of 1.7 percent.
In 2020, private goods-producing industries decreased 2.7 percent, private services-producing industries decreased 3.9 percent, and government decreased 2.1 percent. Overall, 16 of 22 industry groups contributed to the decrease in real GDP in 2020. Within private goods-producing industries, the leading contributors to the decrease were durable goods manufacturing (led by other transportation equipment) and mining.
The Federal Reserve says it will keep buying bonds to maintain low borrowing rates and support the U.S. economy during a recession. It intends to keep the interest rates at rock bottom for even longer than previously expected after a major policy shift that has profound implications for Wall Street, workers, and savers.
In March 2021, Fed raised its forecast for 2021 gross domestic product by more than 50% from its December estimate while holding interest rates steady. GDP is now expected to increase 6.5% in 2021 before cooling off in later years, according to the Federal Open Market Committee, the central bank's monetary policy-making group. That is sharply higher than the 4.2% forecast made in December. Inflation continues to run below 2 percent.
The Fed cut interest rates to essentially zero a year ago as the pandemic shut down much of the economy and has been buying $120 billion in bonds and other securities per month, maintaining easy and cheap credit that has buoyed the economy and prevented more damage. The job market is improving, manufacturing is strong and consumer spending, while taking a breather in February amid a record cold spell, should improve as the year goes on. Many forecasters have raised their estimates of GDP for 2021 to as high as 8% in the private and public sectors.
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. Employers and households also could benefit from cheaper borrowing rates for houses, cars, and other loans. 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.
The Bureau of Labor Statistics (BLS) publishes an occupational outlook each year that goes into great detail about each industry and occupation. Overall, the BLS expects total employment to increase by 6 million jobs between 2019 and 2029. Manufacturing and retail industries will continue shedding jobs, while e-commerce continues to grow.
According to BLS, the unemployment rate edged down to 6.0 percent in March 2021. The rate is down considerably from its recent high in April 2020 but is 2.5 percentage points higher than its pre-pandemic level in February 2020. The number of unemployed persons, at 9.7 million, continued to trend down in March but is 4.0 million higher than in February 2020.
In March 2021, 11.4 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic—that is, they did not work at all or worked fewer hours at some point in the last 4 weeks due to the pandemic. This measure is down from 13.3 million in the previous month.
Total nonfarm payroll employment increased by 916,000 in March but is down by 8.4 million, or 5.5 percent, from its pre-pandemic peak in February 2020. Job growth in March was widespread, with the largest gains occurring in leisure and hospitality, public and private education, and construction. These improvements in the labor market reflect the continued resumption of economic activity that had been curtailed due to the coronavirus (COVID-19) pandemic.
What will 2021 be like for buyers? Economic activities are ramping up in all the sectors, mortgage rates trend at historic lows, and jobs are also recovering. Record low mortgage rates are providing opportunities for buyers to lock in low monthly mortgage payments for future years. The latest housing market trends show that prices are rising in most parts of the country and most price segments because of the lack of supply.
Although growth in supply remains below the normal seasonal pace, it improves as buyers anxiously await more sellers to put fresh new homes for sale on the market. Tight housing inventory was the issue for buyers before Covid-19 as well. 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.
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. 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. Borrowers can request an additional six months if needed. FHA does not require lump sum repayment at the end of the forbearance.
An important step in this direction was the announcement of the payment deferral option for borrowers. The Federal Housing Finance Agency (FHFA) announced on May 13 that Fannie Mae and Freddie Mac (the Enterprises) are making available a new payment deferral option. 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.
What will 2021 be like for investors? Many investors who primarily acquired at the courthouse foreclosure auction are migrating to buy bank-owned (REO) homes via online auction, which also provides the added benefit of safety from viral exposure. The added competition for these homes due to the moratorium on foreclosures could drive up the prices in the distressed housing market.
According to a survey from Auction.com, 64% of investors who primarily buy investment properties as rentals said they planned to increase or keep their acquisitions, despite the pandemic. Even though the housing market likely won’t be the cause of the next recession, an economic downturn would still have an impact on the US real estate sector.
The spillover to the housing market will rely upon the profundity, length, and severity of the recession and, if some parts of the country feel the effect worse than others, some local housing markets could see greater effects.
“The current economic expansion is getting long in the tooth by historical standards, and more late-cycle signs are emerging,” said Scott Anderson, chief economist at Bank of the West, who was among those predicting a 2020 recession.
According to a survey published by WSJ, some 59% of private-sector economists surveyed in recent days said the economic expansion that began in mid-2009 was most likely to end in 2020. 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.
To put it simply, the US housing market is ripe for investment in 2021, making it a great time to buy a rental property for sale to increase your cash flow. A multi-generational housing market is creating limited supply and increased competition, driving up prices at the affordable end of the market for the foreseeable future. In hot job markets and communities that fit the youngest generation’s ideals, price increases of 8-15 percent are possible year-over-year.
Real estate is appreciating at or just above the rate of inflation. You will find sellers' markets in most regions of the country, so you need to prepare for real estate investing accordingly. Find the best investment property for sale and try to get pre-approved for financing well in advance. Paying a mortgage on a home can serve as a forced savings account and help you build equity over time. Lastly, take the help of a good real estate agent/broker to write a great purchase offer and beat out the competition.
Latest Housing Market Data & Statistics