Posted on May 12, 2022
Here are the latest housing market predictions for 2021 & 2022. The global pandemic shattered the world order and the US economy suffered its biggest blow since the Great Depression in the second quarter. It has been roughly one year when it put the housing market on hold for several months last spring.
But the US housing market continues to be a pillar of support for the economy. Even with rising mortgage rates and higher prices, economists say themarket 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.
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 residential real estate has been very resilient. 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.
Existing home sales dropped to a six-month low in February 2021 (lowest level since September 2020) to an annual rate of 6.22 million, a drop of 6.6% from January, according to the National Association of Realtors. On a year-over-year basis, sales were 9.1% higher than a year ago.
Even with the decrease, sales were 9.1% higher than a year ago and prices were 15.8% higher. It is believed that shortages of available homes may be affecting sales. The housing market has been struggling to keep up with the demand for the past decade. Due to this pandemic, it has seen a boom in demand.
The inventory of homes for sale declined 29.5% annually in February 2021, a record drop. The report shows that despite the drop in home sales housing market continues strong even as mortgage rates tick up to the highest levels this year amid rising long-term bond yields. The 30-year fixed-rate average rose to 3.09% last week, according to Freddie Mac.
New home sales also decreased by 18.2% in February to a seasonally adjusted 775,000 while prices rose, according to estimates released by the U.S. Census Bureau and the Department of Housing and Urban Development. The figure was still 8.2% higher than the estimate for February 2020. January's sales number was revised upward to 948,000 from the earlier estimate of 923,000.
New contruction of single-family homes is expected to grow this year. The median price ($349,400) is 5.3% over median price posted a year earlier. Eventhough new home prices are rising due to increase in lumber prices, the lack of existing homes for sale means new construction is the only option for some prospective home buyers.
The housing market has seen buyers hyperactive in 2021, driving up home prices by double-digits and causing homes to sell quickly in competitive market conditions. Currently, there is an extremely tight supply of homes on the market, the lowest on record since the turn of the century. Further home price gains are expected until either supply ramps up or demand eases.
There are reasons to believe that the housing supply will ramp up in the coming months. Realtors believe that the first vaccine roll-out is expected to ease seller apprehensions, which should improve the supply trends throughout the year. Additionally, an improving economy is maintaining upward pressure on mortgage rates over the last couple of months.
In February 2021, the unemployment rate was little changed at 6.2 percent, much lower than their April 2020 highs, according to the U.S. Bureau of Labor Statistics. Working from home has driven up demand for more space but the survey also indicates the number of people working from home has been dwindling each month.
In February, 22.7 percent of employed persons teleworked because of the coronavirus pandemic, down from 23.2 percent in January. These factors will have an impact on housing sales and rents in the coming months. As of now, the rent growth remains lower than pre-COVID rates, but the overall downward trend is leveling off.
Interest rates ticked up again this week, continuing their steady trend upward that has played out for most of 2021. The FHFA announced that it will limit its purchases of loans secured by second homes or investment properties to just 7% of its portfolio. Therefore, mortgaging second homes or investment properties likely to get more expensive in 2021.
Generally, mortgage rates are higher by about 0.5% to 0.75% for second homes and investment properties than for the home you live in. If mortgage rates increase in the coming months, it will affect the affordability and will challenge buyer demand in the months ahead.
In 2021, the housing demand trends will continue to put pressure on home prices 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.
Original Article : https://bgepropertiesllc.com/news
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