Mortgage rates at record lows and a scarcity of inventory are keeping the US housing market robust in terms of demand. While affordability concerns continue to rise, low mortgage rates, rising savings, and a stronger job market all work together to put homeownership within reach of a large number of prospective purchasers. However, will the housing market ever crash? Let’s look at the most recent trends and housing market predictions for 2021 and 2022.
The housing market has been particularly robust this year, with high demand for homes in almost every area of the nation. The real estate market has emerged as a boon for sellers and a source of worry for buyers in the middle of this epidemic. Home prices have been increasing in the mid-single digits for many years. Recent double-digit price rises reflect the convergence of exceptional demand and chronically low supply. Prices are increasing as a result of enough money on the sidelines and very low mortgage rates.
The improving economy and the approaching peak homebuying years of millennials are driving a residential housing boom. Housing supply is now at its lowest level since the 1970s, due to millennial homeownership and other factors such as rising building prices and real estate speculators snapping up starter homes. Low mortgage rates, coupled with more work-from-home possibilities created by the pandemic, have also fuelled a rise in housing demand, especially in lower-density suburbs.
We’ll examine current real estate trends, including price and rent increases, housing sales and supply, mortgage rates and delinquencies, and other key industry takeaways and insights into the US housing market.
State of the Housing Market in 2021
The FMHPI is an indicator for typical house price inflation in the United States. It indicates that home prices increased by 11.3 percent in the United States in 2020 as a result of robust housing demand and record low mortgage rates. Growth is expected to slow to 4.4 percent in 2022, according to the forecast. The current Freddie Mac House Price Index for the United States is 245.2 (June 2021).
10-year Change in House Price Index: 100.5%
Annual Change in House Price Index: 20.11%
Quarterly Change in House Price Index: 5.96%
Monthly Change in House Price Index: 1.95%
According to Realtor.com’s August 2021 national housing report, the market is moving in favour of buyers. Inventory seems to be growing, and buyers who have been suffering from buyer fatigue now have more buying choices and power than in previous years. This year’s market is beginning to show signs of a shift that may eventually result in a more balanced market in the second half of the year.
Home prices are now rising in the single digits, having passed their peak growth rates. These market trends point to a positive development for buyers as we enter the second half of this year. Median listing prices in several metro areas are continuing to fall, owing to an increase in lower-priced houses. New sellers are entering the market at near-normal levels, and while property prices remain high, they may need to consider pricing more competitively in the near future.
The nationwide median listing price for active listings in August was $380,000, up 8.6 percent from the previous year. The annual price growth rate has slowed for the fourth month in a row. The annual median home price growth rate in July was 10.3 percent, down from 12.7 percent in June. In comparison to the previous year, large metros witnessed an average price increase of 3.5 percent. Price rise in the country’s major metros is slowing somewhat quicker than in the rest of the country.
While median listing price growth is slowing, this does not represent a housing market crash. However, the share of homes with price reductions in August surpassed last year’s level and is approaching 2016 to 2019 levels. 17.3 percent of active home listings had their prices reduced in August, up 0.7 percent year over year. While this is still within normal ranges, it may indicate that some sellers are adjusting prices more aggressively than they have in the last year and a half.
The decline in time-on-market has slowed but homes are still being picked up rapidly as demand remains high. The time a typical listing spends on the market is beginning to correspond to seasonal patterns. The typical home spent 39 days on the market this August, 17 days less than last year. As the number of newly listed properties is increasing, the sharp inventory losses of recent months have moderated. The net result has been a deceleration in the growth of listing prices. Due to scarcity and demand, real estate will still appreciate at a faster-than-average rate through late 2021.
CoreLogic, a data and analytics company, projects home price gains may slow over the next 12 months as demand moderates and for-sale inventory rises. The CoreLogic HPI Forecast indicates that home prices will increase by 3.2% from June 2021 to June 2022. The HPI Forecast also reveals the continued disparity in home price growth across metros. Home prices in markets such as Houston, which was badly impacted by the oil industry’s collapse and the recent hurricane season, are anticipated to fall 0.9 percent by June 2022.
Existing-Home Sales Decreased 2% in August 2021
Each of the four major US regions experienced declines in home sales in August 2021, both month over month and year over year, snapping a two-month streak of increases, as reported by the National Association of Realtors. This indicates that the housing market is finally cooling down following a year of frenetic buying.
Existing-home sales dropped 2% on a seasonally adjusted annual rate from July to August.
Home prices increased in all the regions.
This is the 114th consecutive month of year-over-year growth.
The median existing-home price across all housing types was $356,700 in August, up 14.9% from August 2020 ($310,400).
Sales of single-family homes priced below $250,000 decreased, while sales of homes priced above that level increased.
“High home prices make for an unbalanced market, but prices would normalize with more supply,” Yun said.
Sales of homes priced between $750,000 and $1 million increased the most year over year, by 40.1 percent.
Low inventories and high prices contributed to the slowdown in sales.
Despite the slowdown, home sales are still 16% higher than in 2020 and 13% higher than in 2019.
Numerous first-time buyers face an uphill battle.
There were few homes for sale in affordable price ranges.
Additionally, the share of first-time buyers decreased to 29%, the lowest level since January 2019.
Unsold inventory sits at a 2.6-month supply at the current sales pace, unchanged from July but down from 3.0 months in August 2020.
In August, properties stayed on the market for an average of 17 days, unchanged from July and down from 22 days in August 2020.
87% of homes sold remained on the market for less than a month.
Record high prices, combined with a scarcity of available homes, are making it especially difficult for first-time buyers to enter an increasingly competitive housing market. The National Association of Realtors had released research from the Rosen Consulting Group, estimating that between 5.5 million and 6.8 million new houses are needed to meet the demand. All the four major U.S. regions notched double-digit year-over-year gains.
The South accounted for over half of all the sales in July, accounting for 43 percent, followed by the Midwest at 23 percent and the West at 21 percent, with the Northeast accounting for only 13 percent. Highest sales were seen in the price segment of $250,000 to $500,000. This price range accounted for 43% of total home sales seen in August. The price segment of $100,000 to $250,000 range accounted for 25% of total home sales.
Existing home sales were expected to fall but remain elevated, averaging around 6.0 million units this year. Building permits and housing starts are at levels not seen since the previous housing boom. The popular belief is that it is still a good time to sell and that ultimately means that the numbers of home sellers that hit the market are constantly increasing.
This implies that while house prices are still rising, home sellers may need to consider pricing more competitively than in the past couple of months. These latest market trends (seen in July/August) also point to a shift in real estate activity, implying that we may have passed the peak of this hot housing market, which is good news for home buyers.
The market is still heavily skewed toward sellers, but we may be seeing the first signs of a return to a more balanced real estate market following the most active sales period in years. As of today, the housing market remains far from normal, with inventories falling by more than 33% over the past year. The current supply of homes on the market still remains historically low. With the recovering economy, more buyers are entering the market.
And, because there is still a limited supply of housing inventory, home prices continue to rise even in a low-interest-rate scenario. With increased supply, home price growth will gradually moderate, but a broad price decline is unlikely. The housing market will continue to attract buyers as a result of the drop in mortgage rates as well as an increase in new listings.
Existing Housing Sales in August 2021
(Regional Breakdown By N.A.R.)
Northeast
Existing-home sales slid 1.4% in August, recording an annual rate of 730,000, a 2.7 decline from August 2020.
The median price in the Northeast was $407,800, up 16.8% from one year ago.
Midwest
Existing-home sales fell 1.4% to an annual rate of 1,370,000 in August, a 2.1% decline from a year ago.
The median price in the Midwest was $272,200, a 10.5% jump from August 2020.
South
Existing-home sales slipped 3.0% in August, registering an annual rate of 2,550,000, down 0.8% from the same time one year ago.
The median price in the South was $303,200, a 12.8% climb from one year ago.
West
Existing-home sales decreased 0.8%, posting an annual rate of 1,230,000 in August, down 1.6% from one year ago.
The median price in the West was $507,900, up 11.4% from August 2020.
New Home Sales in United States Are Down 24.3 Percent
Sales of new single‐family houses in August 2021 were at a seasonally adjusted annual rate of 740,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 1.5 percent (±15.1 percent) above the revised July rate of 729,000, but is 24.3 percent (±19.1 percent) below the August 2020 estimate of 977,000.
After a year of frenzied buying and price gains in the double digits, newly built homes are now out of reach for much of the demand that remains in the market. The majority of homebuyers are at the upper end of the market, and builders cannot afford to produce cheaper houses owing to rising building prices. The median sales price of new houses sold in August 2021 was $390,900. The average sales price was $443,200. The seasonally‐adjusted estimate of new houses for sale at the end of August was 378,000.
This represents a supply of 6.1 months at the current sales rate. The decrease in new housing sales suggests that demand is diminishing. Applications for house loans have declined this year, as have housing market surveys of potential purchasers. Higher building costs, longer delivery times, and general unpredictability in the construction supply chain are now having measurable impacts on new home prices.
While framing lumber prices have fallen in recent weeks after a high in mid-May, the total cost of wood materials used in house construction continues to rise. For example, since April 2020, the price of softwood plywood has risen by more than 200 percent, while the price of oriented strand board (OSB) has increased by over 500 percent. These price hikes have increased the average price of a new single-family house by almost $30,000 and the average price of a new multifamily housing by nearly $10,000.
According to NAHB, although framing lumber prices have decreased in recent weeks since peaking in mid-May, the overall prices of wood products used in home building continue to soar. For example, the price of softwood plywood has increased by more than 200% and oriented strand board (OSB) prices have skyrocketed nearly 500% since April 2020.
Such price increases have added nearly $30,000 to the average price of a new single-family home, and nearly $10,000 to the average price of a new multifamily home. The bulk of construction material costs rose several times faster in the first seven months of 2021 than they did in 2020. The most obvious example is the rise in the price of steel mill goods, which is up 81.3 percent year to far after an 11.1 percent increase in 2020.
Courtesy of Census.gov
Housing Construction Trends & Homebuilder Confidence
Residential construction had 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. Privately‐owned housing units authorized by building permits in August were at a seasonally adjusted annual rate of 1,728,000. This is 6.0 percent (±1.4 percent) above the revised July rate of 1,630,000 and is 13.5 percent (±1.8 percent) above the August 2020 rate of 1,522,000.
Single‐family authorizations in August were at a rate of 1,054,000; this is 0.6 percent (±1.3 percent) above the revised July figure of 1,048,000. Authorizations of units in buildings with five units or more were at a rate of 632,000 in August. Privately‐owned housing starts in August were at a seasonally adjusted annual rate of 1,615,000.
This is 3.9 percent (±11.3 percent) above the revised July estimate of 1,554,000 and is 17.4 percent (±12.1 percent) above the August 2020 rate of 1,376,000. Single‐family housing starts in August were at a rate of 1,076,000; this is 2.8 percent (±10.4 percent) below the revised July figure of 1,107,000. The August rate for units in buildings with five units or more was 530,000.
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. Building permits have recovered from epidemic lows, and builders are scrambling to close the supply-demand imbalance. They are still optimistic a year after the Covid epidemic brought home development to a halt. Because the current house market continues to suffer from a record low number of listings, they are seeing high demand from potential purchasers.
It is becoming increasingly difficult for them to meet this housing demand due to supply delivery issues and rising material costs. NAHB Housing Market Index (HMI) is a gauge of builder opinion on the relative level of current and future single-family home sales. It is a diffusion index, which means that a reading above 50 indicates a favorable outlook on home sales; below 50 indicates a negative outlook. The latest reading of 80 in July, down from 81.00 last month and up from 72.00 one year ago. This is a change of -1.23% from last month and 11.11% from one year ago. is down slightly from last month.
“Builders are contending with shortages of building materials, buildable lots and skilled labor as well as a challenging regulatory environment. This is putting upward pressure on home prices and sidelining many prospective home buyers even as demand remains strong in a low-inventory environment,” said NAHB Chief Economist Robert Dietz.
The three major HMI indices were mixed in June. The HMI index gauging current sales conditions fell one point to 86, the component measuring traffic of prospective buyers dropped six points to 65 and the gauge charting sales expectations in the next six months posted a two-point gain to 81. Looking at the three-month moving averages for regional HMI scores, the Northeast fell four points to 75, the Midwest moved one-point lower to 71 and the West posted a two-point decline to 87. The South held steady at 85.
According to the NAHB, lumber prices have skyrocketed, particularly the price of oriented strand board, which has skyrocketed more than 500 percent above its January 2020 level. Despite the soaring lumber prices, demand continues to outpace supply, and shortages in just about every building material category are creating delays for contractors. As builder confidence in the market for newly-built single-family homes fell one point to 80 in July, strong buyer demand managed to offset supply-side issues related to building materials, regulation, and labor. 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.
Is Something Big Is About to Happen in the Housing Market?
Even though most pandemic restrictions and business reopenings have been suspended, the market remains cautious about the outlook, particularly in light of the health concerns of autumn and winter. Moreover, lack of inventory remains the most significant impediment to home sales, but falling affordability (due to astronomical price increases) is simply driving some first-time buyers out of the market. According to Realtor.com, the typical home listing price touched a new high of $380,000 in August 2021, an increase of about 8.6 percent over the previous year. Home prices have never dropped, but they were flat this time last year.
However, the rate of home price growth has decreased by 2 percentage points since last month. As inventory continues to dwindle, there is no relief in sight for homebuyers. This year, more homeowners are listing their houses for sale, resulting in a record-high percentage of homes for sale being “new listings.” While the flood of sellers will help alleviate some of the competitive pressure that buyers are under, buyers must still make offers that are strong enough to win out in a multiple bid scenario.
Mortgage rates have been falling since November 2018, when they peaked at 4.94 percent, a five-year high. The rates were cut in 2020 as a result of the pandemic, which helped to mitigate the impact of increasing prices. In January 2021 it reached a record low of 2.65%, driven by massive monetary incentives and investors’ economic recovery concerns. Rates rebound from their lowest point in the first week of April to 3.18%. The Federal Reserve’s continued monetary easing, and especially the bank’s monthly purchases of mortgage-backed securities, is keeping a strong downward pressure on rates.
Screenshot Courtesy of Realtor.com
In 2021, mortgage rates are expected to average 3.1 percent, according to the National Association of Realtors, and 3.3 percent according to the Mortgage Bankers Association. These rate estimates are both up from the 3.0% mortgage rate average in 2020 but lower than 2019 average rates. The amount of time required to save an adequate down payment has increased in recent years, and putting together a down payment remains the most difficult hurdle most buyers will face on their way to homeownership. According to a Zillow analysis of home values and incomes, there are a few silver linings unique to today’s housing market that give first-time buyers a few advantages.
More aggressive savings and/or smaller down payments (buyers can put down as little as 3% in many cases) can significantly shorten the savings time. However, the lower upfront payment comes with higher monthly payments, but for many people, the opportunity to build equity outweighs those extra costs. Also, increased remote work opportunities can lead to more affordable areas, and ultra-low mortgage interest rates can make monthly payments manageable once the down payment is secured.
First-time buyers today need a year longer to save for a 20% down payment than they did five years ago.
Renters will need to save an additional $369 per month in the coming year just to keep up with the forecasted growth in home values.
Most first-time buyers put down less than 20%, but today’s low mortgage rates mean monthly payments can remain affordable with a smaller down payment.
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 September 14th, 2021, the average rate for a 30-year fixed mortgage is 3.02 percent, down 1 basis point since the same time last week. Last month on the 14th, the average rate on a 30-year fixed mortgage was higher, at 3.05 percent. The average rate for the benchmark 15-year fixed mortgage is 2.31 percent, down 2 basis points over the last seven days.
At the current average rate, you’ll pay $421.60 per month in principal and interest for every $100,000 you borrow.
Monthly payments on a 15-year fixed mortgage at that rate will cost roughly $384 per $100k borrowed.
Note: The larger payment may be more difficult to fit into your monthly budget than a 30-year mortgage payment, but it comes with some significant benefits: you’ll save thousands of dollars in total interest paid over the life of the loan and build equity much faster.
How Mortgage Rates Have Shifted Over The Past Week
30-year fixed mortgage rate: 3.02%, down from 3.03% last week, -0.01
15-year fixed mortgage rate: 2.31%, down from 2.33% last week, -0.02
5/1 ARM mortgage rate: 2.78%, down from 2.80% last week, -0.02
Jumbo mortgage rate: 3.03%, down from 3.05% last week, -0.02
The Federal Reserve’s actions last year to keep mortgage rates low have been maintained. However, when contrasted to the robust increase in home prices, the low mortgage rates are insignificant. Here’s an example to show how soaring home prices and plunging mortgage rates can have offsetting effects. Let’s say you chose to buy a $300,000 home a year ago when the 30-year mortgage rate was around 3.16 percent. Your 20 percent down payment would’ve been $60,000 and your monthly payment would’ve been $1,032. The price of the same house has jumped to $360,000 today. However, you can get a 30-year mortgage at 3.05 percent. As a result, your monthly payment rises only slightly, to $1,221.
However, you’ll have to come up with an extra $12,000 (20% of $360,000 = $72,000) to make a 20 percent down payment. Therefore, 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.
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.
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.
According to the NAR’s Housing Affordability Index, national housing affordability fell in April compared to a year ago. Affordability fell in April compared to March, as median family income fell by 1.0 percent while monthly mortgage payments rose by 16.1 percent. The effective 30-year fixed mortgage rate1 was 3.11 percent in April, down from 3.37 percent a year ago, but the median existing-home sales price increased 19.9 percent. As of April 2021, the national and regional indices were all above 100, meaning that a family with the median income had more than the income required to afford a median-priced home.
Housing affordability is down in all four regions since last month. The Midwest had the biggest decline of 12.0%, followed by the Northeast, which fell 10.7%. The South region fell 9.8%, followed by the West region, with the smallest decrease of 8.2%. The most affordable region was the Midwest, with an index value of 202.7 (median family income of $87,285, which is more than twice the qualifying income of $43,056). The least affordable region remained the West, where the index was 113.7 (median family income of $95,103 and qualifying income of $83,616).
Source: NAR’s Housing Affordability Index
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. 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.
Housing Market Monthly Trends: Price Growth Slows Down in August 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 1.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending September 3, 2021.
Mortgage application volume fell last week to its lowest level since mid-July.
The Market Composite Index, a measure of mortgage loan application volume, decreased 1.9 percent on a seasonally adjusted basis from one week earlier.
The Refinance Index decreased 3 percent from the previous week and was 4 percent lower than the same week one year ago.
The refinance share of mortgage activity remained unchanged at 66.8 percent of total applications from 66.8 percent the previous week.
The FHA share of total applications decreased to 10.9 percent from 11.2 percent the week prior
The VA share of total applications increased to 10.4 percent from 9.7 percent the week prior.
The USDA share of total applications remained unchanged from 0.5 percent the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) remained unchanged at 3.03 percent.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.07 percent from 3.09 percent.
The average contract interest rate for 15-year fixed-rate mortgages decreased to 2.37 percent from 2.39 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.
Source: Zillow.com
Realtor.com’s August 2021 real estate data demonstrates that the housing market is continuing to normalise, as newly listed homes are becoming smaller and more affordable, and sellers are becoming more competitive by increasing their share of price reductions. However, homes are still selling at a faster rate than last year, more than two weeks faster.
August’s national median listing price for active listings was $380,000, up 8.6% year over year and 19.6% compared to 2019.
Large metros saw an average price gain of 3.5% compared to last year.
The national inventory of active listings declined by 25.8% over last year.
The total inventory of unsold homes, including pending listings, declined by 13.8%.
The inventory of active listings is still down 52.8% compared to 2019.
Newly listed homes on the market are up 4.3% nationally compared to a year ago, and 5.1% higher for large metros over the past year.
Sellers are still listing at rates 8.6% lower than typical 2017 to 2019 levels.
Nationally, the typical home spent 39 days on the market in August, much less than the 56 days during the same month in 2020 and 63 days which was typical in the 2017 to 2019 period.
REGIONAL HOUSING STATISTICS – Aug 2021
Region
Active Listing Trends YoY
New Listing Trends YoY
Median Listing Price YoY
Median Days on Market Trends YoY
Midwest
-8.00%
12.50%
-5.90%
-11 days
Northeast
-16.20%
-1.20%
-1.40%
-7 days
South
-30.20%
6.10%
7.40%
-17 days
West
-19.20%
0.60%
9.30%
-8 days
Housing Market Trends For Supply
Nationally, the inventory of homes for sale in August decreased by 25.8% over the past year, a lower rate of decline compared to the 33.5% drop in July. This decline amounted to 223,000 fewer homes actively for sale on a typical day in August compared to the previous year. A slowing in the decline of inventory indicates that the market is improving, but active inventory remains historically low. 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 13.8% percent from August 2020.
In August, newly listed homes grew by 4.3% on a year-over-year basis but declined by 2.8% compared to July, following typical seasonal patterns. This year, growth in new listings has continued into the fall season, which is a positive sign for a tight housing market of 2021. However, newly listed homes are still down 8.6% from the typical rate of newly listed homes 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 decreased by 20.7% over last year in August, a large slowdown in the rate of decline compared to last month’s 28.1% decrease. Regionally, the inventory of homes in southern metros is still showing the largest year-over-year decline (-30.2%), but on average, southern metros have the second largest growth rate in newly listed homes (+6.1% year-over-year) after the Midwest.
Housing Markets that saw the largest year-over-year increase in newly listed homes in August:
Columbus, where newly listed homes grew by +25.6%
Louisville, where newly listed homes grew by +22.8%
Cleveland, where newly listed home grew by +21.6%
The only housing Markets that saw the year-over-year decrease in newly listed homes for June:
Raleigh, where newly listed homes declined by -18.8%
Nashville, where newly listed homes declined by -18.5%
Hartford, where newly listed homes declined by -12.3%
According to the National Association of Realtors®, total housing inventory at the end of August totaled 1.29 million units, down 1.5% from July’s supply and down 13.4% from one year ago (1.49 million). Unsold inventory sits at a 2.6-month supply at the current sales pace, unchanged from July but down from 3.0 months in August 2020.
Housing Market Trends For Median Listing Prices
Realtor.com’s data shows that the median national home listing price fell slightly in August, from $385,000 in July to $380,000. The median listing price increased by 8.6 percent over the previous year, which was lower than the 10.3 percent growth rate seen last month. This is the fourth month in a row that the annual growth rate has fallen below double digits, and the first month since July 2020 that the annual growth rate has fallen below double digits. As previously stated, while median listing price growth is slowing, this trend reflects a shift in the inventory mix available for sale this month versus last year, with more small homes available for sale this year.
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.
In June 2021, the median national home listing price grew by 12.7 percent year-over-year to $385,000.
In July 2021, the median national home listing price grew by 10.3 percent year-over-year to $385,000.
In August 2021, the median national home listing price grew by 8.6 percent year-over-year to $380,000.
Asking prices in the nation’s largest metro housing markets grew by an average of 3.5% compared to last year, but are slightly lower than last month’s rate of 3.9%. Price growth in the nation’s largest metros is slowing slightly faster than in other areas, but the primary reason is new inventory bringing relatively smaller homes to the market.
Housing Markets that saw the largest year-over-year increase in listing prices in August:
Austin, where median listing price grew by +36.0%
Las Vegas, where median listing price grew by +22.9%
Tampa, where median listing price grew by +20%
Housing Markets that saw the largest year-over-year decrease in listing prices in August:
Milwaukee, where median listing price grew by -16%
Cleveland, where median listing price grew by -14%
Virginia Beach, where median listing price grew by -8.1%
Housing Market Trends For Median Sales Prices
According to the National Association of Realtors®, the median existing-home price for all housing types in August was $356,700, up 14.9% from August 2020 ($310,400), as prices increased in each region. This marks 114 straight months of year-over-year gains. The median existing single-family home price was $363,800 in August, up 15.6% from August 2020. The median existing condo price was $302,800 in August, an annual increase of 10.8%.
Housing Sales Trends 2021
Homes for sale in August continued to sell more quickly than last year, as buyer demand remained on a strong footing. The average home stayed on the market for 39 days in August, down 17 days from last year. While homes continue to be snapped up quickly as demand remains high, the average time a listing spends on the market is beginning to conform to seasonal norms. While time on market continued to decline until October of last year, time on market increased in August over July this year, indicating a more typical seasonal trend.
In the 50 largest U.S. metros, the typical home spent 33 days on the market, and homes spent 12 days less on the market, on average, compared to last August. Among these 50 largest metros, the time a typical property spends on the market has decreased most in large metros in the South (-17 days), followed by the Midwest (-11 days), West (-8 days), and Northeast (-7 days).
Homes saw the greatest decline in time spent on the market compared to last year in:
Miami (-34 days)
Jacksonville (-26 days)
Raleigh (-24 days)
While New York (+5 days), San Diego (+4 days), and Washington, DC (+3 days) were the only metros to see an increase in time on market, this indicates that the fall housing market will be cooler than last year’s peak.
Total existing-home sales that include single-family homes, townhomes, condominiums, and co-ops, fell 2.0% from July to a seasonally adjusted annual rate of 5.88 million in August, according to the National Association of Realtors®. Year-over-year, sales dropped 1.5% from a year ago (5.97 million in August 2020). Distressed sales – foreclosures and short sales – represented less than 1% of sales in August, equal to the percentage seen a month prior and equal to August 2020.
First-time buyers accounted for 29% of sales in August, down from 30% in July and 33% in August 2020. Individual investors or second-home buyers, who account for many cash sales, purchased 15% of homes in August, even with July but up from 14% in August 2020. All-cash sales accounted for 22% of transactions in August, down from 23% in July and up from 18% in August 2020.
Single-family home sales decreased to a seasonally adjusted annual rate of 5.19 million in August, down 1.9% from 5.29 million in July and down 2.8% from one year ago. Existing condominium and co-op sales were recorded at a seasonally adjusted annual rate of 690,000 units in August, down 2.8% from 710,000 in July but up 9.5% from one year ago.
Hottest Housing Markets: Sales And Price Growth Forecast 2021
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%.
Source: Realtor.com’s top 10 housing markets for 2021
Is the Housing Market Going to Crash in 2021 or 2022?
Is there going to be a housing market crash in 2021 or 2022? What a difference a pandemic like Covid makes on the housing market, which advances in the opposite direction of what one would expect in a recession! We are unlikely to see a housing market crash similar to the one that occurred during the 2008 housing bubble. We do see the momentum cooling over the next year. The economic factors resulting in that housing crash were much different than today. Here’s an overview of how to think about a potential housing market crash and the factors that affect real estate cycles.
Early on in the COVID-19 crisis, it appeared that the housing market might collapse. Instead, a housing boom has occurred with the median home prices rising by an astounding 24 percent since the crisis began. The mortgages backed by the federal government were exempted from the foreclosure moratorium. It kept the housing market afloat during the crisis. To help borrowers at risk of losing their homes 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.
On June 24th, the Biden administration extended the foreclosure moratorium for a final, additional month until July 31, 2021, and the forbearance enrollment window through September 30, 2021, and provided up to three months of additional forbearance for certain borrowers. It will will avert displacement of foreclosed borrowers and other occupants who need more time to access suitable housing options after foreclosure. The government’s moratoria has been 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 possibilty of a backlog of foreclosures building up due to this moratorium and no one knows how big that backlog is going to be. 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.
These actions were taken by three federal agencies that back mortgages – the Department of Housing and Urban Development (HUD), Department of Veterans Affairs (VA), and Department of Agriculture (USDA). The Federal Housing Finance Agency (FHFA) provided similar relief for mortgages backed by Fannie Mae and Freddie Mac. It has given relief to more than 28 million homeowners with an Enterprise-backed mortgage.
The foreclosure moratorium applied to Enterprise-backed, single-family mortgages only. The REO eviction moratorium applied to properties that have been acquired by an Enterprise through foreclosure or deed-in-lieu of foreclosure transactions. These actions have prevented foreclosures and allowed some homeowners with government-backed loans to pause their mortgage payments for up to eighteen months.
The foreclosure crisis that followed the 2008 housing crash was exacerbated in part by the fact that tens of millions of financially stressed homeowners were underwater. This year, that is unlikely to be the case for heavily indebted homeowners. These homeowners are likely to have significant home equity, and if they are unable to repay their mortgage, they can simply sell into the current hot housing market. The buyer traffic is still moderately strong throughout most of the country, which is a great sign for these homeowners.
So, is this a Housing Bubble? A “housing bubble” is formed by the artificially and unsustainably high prices of an already hot housing market — like the one United States has been experiencing over months. The housing industry and its economic factors depend on supply and demand. The bubble starts forming when demand for property rises and supply begins to diminish, a combination that can only lead to price hikes. As inventories shrink, anxious buyers start paying even more money on properties that are already selling much beyond the market value.
Now the fear is that even if only a small percentage of the 1.75 million homeowners currently protected by the mortgage forbearance programme choose to sell rather than repay their mortgage, it could have a significant impact on the historically tight housing market. There will be an increase in housing inventory which has a direct impact on the prices. However, because current inventory is at a 40-year low, we anticipate that home prices will continue to rise rapidly even if the forbearance programme is terminated. Let’s see what the comprehensive foreclosure data of the US housing market looks like.
About 1.55 million serious delinquencies remain, according to Black Knight’s First Look at June 2021 Mortgage Data.
The national delinquency rate hit its lowest level since the onset of the pandemic and is now back below its pre-Great Recession average
Despite the improvement, there are more than 1.5 million homeowners 90 or more days past due on their mortgages but who are not in foreclosure, still nearly four times pre-pandemic levels
Serious delinquency rates remain elevated by more than a full percentage point across all 50 states, with Hawaii and Nevada serious delinquency rates remaining elevated by 3.4 percentage points
Though serious delinquencies remain significantly elevated, the share of mortgages in active foreclosure fell to yet another record low in June at 0.27%
Recent pullbacks in interest rates resulted in prepayment activity edging upward for the first time in three months.
US Housing Foreclosure Statistics 2021
ATTOM Data Solutions, licensor of the nation’s most comprehensive foreclosure data released its Midyear 2021 U.S. Foreclosure Market Report. It shows that which shows there were a total of 65,082 U.S. properties with foreclosure filings — default notices, scheduled auctions, or bank repossessions — in the first six months of 2021. That figure is down 61 percent from the same time period a year ago and down 78 percent from the same time period two years ago.
The government’s foreclosure moratorium and mortgage forbearance program has resulted in an unusual scenario, with historically high numbers of significantly overdue loans and historically low levels of foreclosure activity. Nationwide 0.05 percent of all housing units (one in every 2,112) had a foreclosure filing in the first half of 2021.
A total of 36,742 U.S. properties started the foreclosure process in the first six months of 2021, down 63 percent from the first half of last year but up 14 percent from the last half of 2020. Lenders foreclosed (REO) on a total of 9,730 U.S. properties in the first six months of 2021, down 74 percent from a year ago to the lowest six-month total since we began tracking in 2005. States that saw the greatest decline in foreclosure starts from the same time last year included Maryland (down 95 percent); Oklahoma (down 87 percent); Pennsylvania (down 81 percent); Idaho (down 78 percent); and New Mexico (down 76 percent).
The following states had the highest foreclosure rates in the first half of 2021:
Delaware (0.10 percent of housing units with a foreclosure filing)
Illinois (0.09 percent)
Florida (0.08 percent)
Ohio (0.08 percent)
Indiana (0.08 percent)
The following metropolitan statistical areas had the highest foreclosure rates in the first half of 2021:
Lake Havasu, Arizona (0.25 percent of housing units with foreclosure filings)
Cleveland, Ohio (0.15 percent)
Macon, Georgia (0.13 percent)
Peoria, Illinois (0.12 percent)
Florence, South Carolina (0.12 percent)
June 2021 Foreclosure Activity High-Level Takeaways
Nationwide in June 2021, one in every 10,547 properties had a foreclosure filing
States with the highest foreclosure rates in June 2021 were Nevada (one in every 3,959 housing units with a foreclosure filing); Delaware (one in every 5,700 housing units); Illinois (one in every 5,923 housing units); South Carolina (one in every 5,971 housing units); and New Jersey (one in every 6,367 housing units).
6,826 U.S. properties started the foreclosure process in June 2021, up 16 percent from the previous month and up 40 percent from a year ago.
Lenders completed the foreclosure process on 2,311 U.S. properties in June 2021, up 76 percent from the previous month but down 8 percent from a year ago.
In 2021, home prices are rising at the highest rate in history, outpacing even the housing bubble preceding the Great Recession. This is, however, most likely not a bubble. Today’s housing market is not at all like the mid-2000s bubble that ruined the US economy. Unlike back then, there is now a severe housing scarcity, and housebuilders are treading carefully when it comes to adding new supplies. The current supply scenario is the polar opposite of the building glut of 15 years ago: there was a major overbuilding problem back then.
Around 2 million houses were created every year at its height, compared to around 1.6 million presently. Also, during the last boom, home demand was artificially boosted by the fact that some people with little or no income could obtain loans. This time, lenders are acting much more responsibly. There is little leverage, and mortgage underwriting is considerably better than it was during the Great Recession. More existing homes were sold last year than in any year since 2006. The latest existing-home sales data shows the tightest housing market on record.
The demand has not gotten significantly shorter since May/June of 2020, 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 of the mid-2000s. 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. 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. 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.
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.
The Federal Reserve Bank of New York’s Center for Microeconomic Data released the June 2021 Survey of Consumer Expectations, which shows an increase in the median inflation expectations at the short-term horizon, while inflation expectations at the medium-term horizon remained unchanged. Household’s year-ahead income and spending growth expectations continued their recent upward trend. Home price growth expectations remain elevated.
Inflation
Median inflation expectations increased 0.8 percentage points in June to 4.8% at the one-year horizon, reaching a new series’ high, and remained unchanged at 3.6% at the three-year horizon. The increase in the short-term measure was driven mostly by respondents who have some college education. Median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes— increased at the short-term horizon and remained unchanged at the medium-term horizon.
Median year-ahead home price change expectations remained unchanged at 6.2% in June, substantially higher than its 12-months trailing average of 3.7%. Median year-ahead home price growth uncertainty—or the uncertainty expressed regarding year-ahead home price growth outcomes—increased and reached a new series high.
Labor Market
Median one-year ahead expected earnings growth increased by 0.1 percentage point to 2.6% in June, its highest reading since the start of the pandemic (February 2020).
Mean unemployment expectations—or the mean probability that the U.S. unemployment rate will be higher one year from now— decreased to 30.7% from 31.9%, a new series low.
The mean perceived probability of losing one’s job in the next 12 months decreased from 12.6% to 10.9%, reaching a new series low.
The mean perceived probability of finding a job in the next three months (if one’s current job were lost) increased by 0.2 percentage points to 54.2%, its highest reading since February 2020.
What Happens Next?
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). 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, the combination of low mortgage interest rates, an improving economy, and demographic factors continues to stoke buyer demand and fuel market competition.
While demand for houses remains robust, these limitations are restricting some sales activity and bringing the volume down to historic norms after skyrocketing to 15-year highs in late 2020 and early 2021. Despite the recent decline in mortgage applications, existing house sales volume remains above pre-pandemic levels, and recent gains in inventory, as well as May’s significant surge in pending sales, may suggest further progress. Sales volume may not be meeting the lofty expectations established early this year, but it is holding steady as the summer progresses.
Mortgage rates have been pushed to historic lows since the start of the coronavirus pandemic in the U.S., and new minutes from the Federal Reserve’s Open Market Committee (FOMC) hint that they’re likely to remain low, at least for a while. Mortgage experts mostly think rates will fall in the coming weeks. In response to Bankrate’s weekly poll, 58 percent said rates will drop while 33 percent said rates will go nowhere and just 8 percent said they will rise.
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.
In June 2021, total nonfarm payroll employment rose by 850,000, and the unemployment rate was little changed at 5.9 percent, according to the U.S. Bureau of Labor Statistics. Both the unemployment rate and the number of unemployed persons, at 9.5 million, were little changed in June. These measures are down considerably from their recent highs in April 2020 but remain well above their levels before the coronavirus (COVID-19) pandemic (3.5 percent and 5.7 million, respectively, in February 2020).
Reduced purchasing power (due to higher prices) may relieve some of the pressure on home prices as marginal buyers are forced out of the market as mortgage rates slowly climb to above 3 percent 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 June was $363,300, a new record high that represents a 23% 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 112 straight months of year-over-year gains.
Most homes continue to sell faster and the total number of homes available for sale continued to be constrained in June. You will still see a hot sellers’ real estate market in most areas of the country. According to Realtor.com, Midwest and Northeast regions have been gaining ground, together claiming 15 of the top 20 spots on our list in May, up from 12 last year, and the most spots of any May on record. Midwestern markets accounted for 9 of the top 20 markets, while the Northeast accounted for 6 of the top 20.
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.
Of the largest 40 metros, the most-improved housing markets in May were:
Tampa-St. Petersburg-Clearwater, FL (+86 spots)
Detroit-Warren-Dearborn, MI (+72 spots)
Nashville-Davidson-Murfreesboro-Franklin, TN (+49 spots)
Riverside-San Bernardino-Ontario, CA (+48 spots)
Jacksonville, FL (+43 spots)
Other recent market trends show that more sellers than normal are planning to list their homes for sale. 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.
32 percent of respondents to “Fannie Mae’s June 2021 National Housing Survey” said it was a good time to buy a home, the lowest in the survey’s history. 64 percent of respondents said it’s a bad time to buy a home, up from 56 percent last month. As a result, the net share of those who say it is a good time to buy decreased 11 percentage points month over month.
Seller sentiment increases as 77 percent of respondents said they believed it was a good time to sell a home, up from 67 percent last month. As a result, the net share of those who say it is a good time to sell increased 20 percentage points month over month. The components more closely associated with household finances were largely flat month over month but remain elevated compared to this time last year, particularly the component regarding job security. Year over year, the overall index is up 3.2 points.
The number of respondents who believe home prices will rise in the next 12 months went from 47 to 48 percent, while the percentage who believe home prices will fall climbed from 17 to 21 percent. The proportion of those who believe housing prices will remain stable fell from 29 percent to 25 percent. As a result, the net share of Americans who say home prices will go up decreased 3 percentage points month over month.
Screenshot Courtesy of Fannie Mae June 2021 Data Release
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-family housing starts broke 1 million was in 2007.
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. In fact, first-time buyers accounted for 31% of sales in June 2021, also even with May but down from 35% in June 2020. 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. 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. The latest data on housing construction is given below.
United States – Housing Price Index 2021
In today’s housing market, buyers are driving up property prices, leading homes to sell rapidly. Some hyperactive buyers make offers without seeing the property and forego contingencies to win bidding wars in the highly competitive housing market. The historically low mortgage rates have fueled an increase in demand, particularly among millennials. However, they are running into a shortage of available housing. Many buyers are still in the hope of finding a home that fits their budget and needs.
Despite popular belief that now is not a good time to buy, many home buyers are looking to lock in their monthly housing payments by taking advantage of still-low mortgage rates. However, in this hot real estate market, it’s difficult for buyers to find a good deal, especially with the typical asking price rising by double digits. Although the housing market is still expected to favor sellers we appear to be at a tipping point in the housing market, where prices have risen so dramatically that buyers are backing off and home sales are slowing down.
House prices continued to rise at an all-time high in May. House prices rose nationwide in May, up 1.7 percent from the previous month, according to the latest Federal Housing Finance Agency House Price Index (FHFA HPI®). House prices rose 18.0 percent from May 2020 to May 2021. For the nine census divisions, seasonally adjusted monthly house price changes from April 2021 to May 2021 ranged from +1.0 percent in the Middle Atlantic division to +2.4 percent in the Pacific division.
The 12-month changes ranged from +15.4 percent in the West South Central division to +23.2 percent in the Mountain division. 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.
Source: FHFA
The first quarter of 2021 housing market statistics indicated that house buyers will face a competitive summer season as inventory remains low. Due to the brisk demand, purchasers have been frantically bidding up the prices of available houses, sending property prices skyrocketing. 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 lacking.
House prices rose 12.6 percent from the first quarter of 2020 to the first quarter of 2021. 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.
FHFA House Price Index Report – 2021 Q1
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
Source: FHFA House Price Index Report – 2021 Q1
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.
Housing Market Predictions 2022: Will Prices Go Down in 2022?
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. In 2020, the housing market was running at a record pace in the early stages of the coronavirus outbreak in February, 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 came into existence, 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.
Since the pandemic came into being, the housing market forecast has been running the gamut from optimistic to pessimistic. The fall in GDP associated with the coronavirus pandemic, and the rise in unemployment, was unprecedented in 2020. 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 2020, 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 2020. 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.
Another prediction by Zillow shows tells us 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 were afraid it won’t sell and thus didn’t list their homes. 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. 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.
Why is there a negative housing market forecast for 2021 amidst the ongoing boom? Well, the foreclosure moratorium has 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. 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 2022 because foreclosure that starts today will probably not be processed until mid of 2022. It will be well into 2022 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 shows that the housing boom will continue but the seasonal trends will normalize.
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 are 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 Metrics
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%
Homeownership Rate
65.9%
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 largely 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 sales 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.
According to a recent housing market forecast by Zillow, home values might climb by double digits between now and summer 2022. Even though this forecast does not cover the entire year of 2022 it is worth mentioning. In July 2021 month, Zillow estimated that the median house value in the United States will grow by around 13% between now and July 2022. This would come on the heels of a year-on-year increase of about 15%. According to Zillow, the typical home value of homes in the United States is $293,349, up 15.0% over the past year. This value is seasonally adjusted and only includes the middle price tier of homes. Rents are also up year-over-year, increasing 5.4% from last May. Typical rent is now $1,747 per month across the U.S.
What Will 2022 Be Like for The Housing Market?
Forecasts for house prices and the housing market are essentially informed guesses based on existing patterns. 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. Economic activities are ramping up in all the sectors, mortgage rates trend at historic lows, and jobs are also recovering. The latest employment report from the U.S. Labor Department showed that while the U.S. economy added 850,000 nonfarm payroll jobs in June 2021, it is still down 6.8 million jobs from February 2020.
Job openings have surged to a record high of 9.2 million, and as the economy continues to reopen, we expect the economy to continue to mend. Consensus forecasts put full-year U.S. Real GDP growth over 6% in 2021, which would help to close the large gap between the current level of economic activity and potential output. The latest housing market trends show that prices continue to rise in most parts of the country and most price segments because of the lack of supply. On July 15, Freddie Mac, a government-sponsored mortgage buyer, released its latest quarterly housing market estimate for the United States.
The long-term interest rates have fallen recently. The U.S. weekly average 30-year fixed-rate mortgage was 2.9% for the week of July 8, 2021. And, while Freddiemac forecast rates to increase gradually later in the year, they don’t expect to see a rapid increase. At the end of the year, Freddiemac forecast 30-year rates will be around 3.4%, rising to 3.8% by the fourth quarter of 2022. As of now, low mortgage rates are providing opportunities for buyers to lock in low monthly mortgage payments for future years.
Among other factors, the Federal Home Loan Mortgage Corporation forecasted that home price rise in the United States will “moderate” or slow in 2022. According to their most recent housing market forecast, house value growth in 2022 will be less than half of what we’ve witnessed so far this year. The increase in house price growth will be less transitory than the increase in consumer prices, as the U.S. housing market will continue to struggle with a shortage of available housing for many months to come. The analysts predict that property prices in the United States will climb by an average of 12.1 percent in 2021 and there will be a 5.3 percent increase in prices in 2022.
A respite of this kind means a return to normalcy in 2022. If you look at America’s house price history, they tend to rise over the long term, between 3% and 5% every year. According to Black Knight, a real estate and mortgage data analytics company, annual home price growth has seen a 25-year average of 3.9%. In 2019, the average annual price gains marginally decreased to 3.8 percent, the first time since 2012 they have decreased. The significant double-digit gains witnessed over the last year are an exception caused by an overheated US housing market. Such quick price increases are typically unsustainable in the long run, as they exhaust many potential homebuyers.
A 5.3 percent gain in home prices would be more in line with historical trends. Recent figures on house purchase mortgage applications show some signs of weakening demand. And, while sales are above pre-pandemic levels, sales have been slopping for the past four straight months since the first quarter of this year. This is mirrored in Freddie Mac’s house sales predictions, which has total home sales falling to 6.9 million in 2021 and 2022 after hitting a seasonally adjusted annual rate of 7.6 million and 7.2 million in the fourth and first quarters of 2020, respectively.
They also forecast that strong home sales and strong house price rises will increase home purchase mortgage originations from $1.8 trillion in 2021 to $1.9 trillion in 2022. We anticipate that refinance activity will slow as mortgage rates rise, with refinance originations falling from $2.2 trillion in 2021 to $713 billion in 2022. Total originations are expected to fall from $3.9 trillion in 2021 to $2.6 trillion in 2022.
The US housing market is ripe for investment in 2021 & 2022, making it a great time to buy an investment property 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.
United States Rental 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. However, the latest month’s data is more evidence of a recovering economy and the resilience of the multifamily industry.
The National Multifamily Housing Council (NMHC)’s Rent Payment Tracker found 80.2 percent of apartment households made a full or partial rent payment by August 6 in its survey of 11.7 million units of professionally managed apartment units across the country. This is a 0.9 percentage point increase from the share who paid rent through August 6, 2020 and compares to 81.2 percent that had been paid by August 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.
Source: NMHC Rent Payment Tracker
Zumper’s National Rent Report (July 2021), shows rents in every part of the country are on the rise. Zumper’s National Rent Index in July posted a 7 percent year-over-year increase in one-bedroom rent and an 8.7 percent increase in two-bedroom rent. Since the beginning of 2021, rent has steadily risen on a year-over-year basis, but the pace grew more rapidly in April, a trend that continues in this month’s report. For context, the Zumper National Rent Index rose at a steady 1 percent clip during most of 2020, while it was mostly flat in 2019.
The dramatic rise in rent that’s come to define 2021 accelerated in July, with Zumper’s National Rent Index rising 7 percent year-over-year for one-bedroom apartments and a staggering 8.7 percent for two-bedroom apartments.
While rent is rising in almost every corner of the country, many of the big cities that experienced the largest drops in rent over the course of the pandemic remain down considerably year-over-year, although most bottomed out earlier in 2021.
Even in the greater metro areas for the cities that are down, there are rent increases in the surrounding suburbs.
Aside from the Bay Area, it’s hard to find an entire metro area where rent is down across the board.
Some of the metro areas that have experienced the most growth include Phoenix, Miami, Atlanta, Dallas, Orlando, San Diego, and Tampa Bay.
The Atlanta metropolitan area has seen a steady influx of population over the last decade, pushing rent in the city and its suburbs to new heights.
Rent in much of the area is up by double digit percentages year-over-year, with some suburbs coming close to being up 20 percent.
Screenshot Courtesy of Zumper.com
Apartment Guide’s June 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.
National Average Rent Price Trends
The report shows a shift in recent patterns. One-bedroom apartments remain in high demand since last month, while studios and three-bedroom units are declining in popularity.
0-BR: $1,641 (+0.6 percent from prior month / -3.1 percent year-over-year)
1-BR: $1,711 (+2.9 percent from prior month / +5.2 percent year-over-year)
2-BR: $1,972 (+1.9 percent from prior month / +4.8 percent year-over-year)
3-BR: $2,012 (-2.8 percent from prior month / -1.4 percent year-over-year)
State Average Rent Price Trends
The statewide data shows that studios, one-bedroom and two-bedroom apartments have almost equal changes in rent price trends. All three unit types saw rent prices increase in 60 percent or more of states. Three-bedroom apartments, on the other hand, saw a major decrease, with more than half of states reflecting lower rent prices compared to one year ago.
0-BR: 62 percent of states are up and 38 percent are down
1-BR: 62 percent of states are up and 38 percent are down
2-BR: 67 percent of states are up and 33 percent are down
3-BR: 42 percent of states are up and 58 percent are down
City Average Rent Price Trends
The top 5 cities that have experienced the biggest increases in one-bedroom rent prices year-over-year.
Las Vegas, NV (+42.1 percent)
Jacksonville, FL (+35.5 percent)
Tucson, AZ (+32.5 percent)
Santa Ana, CA (+27.3 percent)
Houston, TX (+24.3 percent)
The top 5 cities that have experienced the biggest decreases in one-bedroom rent prices year-over-year.
Washington, DC (-20.3 percent)
Fort Wayne, IN (-19.8 percent)
San Francisco, CA (-18.2 percent)
Toledo, OH (-18.0 percent)
Milwaukee, WI (-15.7 percent)
The top 5 cities that have experienced the biggest increases in two-bedroom rent prices year-over-year.
Henderson, NV (+46.7 percent)
Tucson, AZ (+38.6 percent)
Buffalo, NY (+37.8 percent)
Scottsdale, AZ (+36.1 percent)
Hialeah, FL (+33.7 percent)
The top 5 cities that have experienced the biggest decreases in two-bedroom rent prices year-over-year.
St. Petersburg, FL (-37.9 percent)
Seattle, WA (-33.9 percent)
Fort Wayne, IN (-23.1 percent)
Washington, DC (-16.4 percent)
San Antonio, TX (-16.2 percent)
August 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 2.5 percent from June to July, continuing a months-long trend of rapidly accelerating rent growth. This month’s increase keeps rents considerably beyond where they would have been if growth had continued on its pre-pandemic path. So far in 2021, the national median rent has increased by a staggering 11.4 percent. In March, prices had rebounded to their pre-pandemic levels, and in April, rent growth hit a new milestone.
The national median rent currently stands at $1,244.
Rents are rising quickly everywhere in the U.S.
Rent growth in 2021 so far is outpacing pre-pandemic averages in 98 of the nation’s 100 largest cities.
Many mid-sized markets that have seen rents grow rapidly through the pandemic are only continuing to boom.
Rents in Boise are now up 39 percent since last March.
Similarly, Spokane, WA has seen rents jump by 32 percent since March 2020.
Rents remain below pre-pandemic levels in just 13 of the nation’s 100 largest cities.
But even in these markets, rents are quickly bouncing back.
In San Francisco, for example, rents are still 14 percent lower than they were in March 2020, but the city has seen prices increase by 17 percent since January of this year.
Even sharper rebounds have been observed in Boston (+23 percent since January), Seattle (+22 percent), and New York (+21 percent).
Remote work and the economic fallout of the pandemic will undoubtedly continue to impact local rental markets going forward.
Graph Credits: Apartmentlist.com
June 2021 Data by Realtor.com shows that rents across the country reached new highs in June. In 44 of the 50 largest metro areas, rents reached their highest levels on record, and are growing faster than ever. In June 2021, the median national rent reached $1,575, an increase of $118 (8.1%) year-over-year. Beyond simply recovering to pre-pandemic levels, rents across the country are surging. Typically, rents fluctuate less than 1% from month to month. In May and June, rents increased by 3.0% and 3.2% from each month to the next.
June 2021 data: In the 50 largest metros, the median rent was $1,575, up 8.1% year-over-year. This translates to an additional $118 per month for renters. Compared to June 2019, the median rent has increased by $149 (10.4%).
Rents by size: Studio: $1,294, up 4.0% ($49) year-over-year; 1-bed: $1,466, up 8.0% ($109); 2-bed: $1,770, up 10.2% ($163). Rents for all unit sizes are at series highs.
Rents are increasing the most in Riverside, CA; Memphis, TN; and Tampa, FL; and Phoenix, AZ metro areas — all saw rents grow more than 20% year-over-year in June.
In 44 of the 50 largest markets, rents in June were the highest they’ve ever been; in 6 of the 50 largest markets, typically the most dense areas with big tech industries, rents still lagged behind historical peaks.
Riverside, CA was the fastest growing metro area, with the median rent reaching $2,112 in June, up 24.2% year-over-year. The other metros topping the list of fastest growing rents were Memphis, TN; Tampa, FL; and Phoenix, AZ, which all saw rents growing by over 20% compared to last year.
Source: Realtor.com
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. While rental vacancy rates are slightly higher this year compared to last, they remain lower than we’ve seen historically. 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.
In the second quarter 2021, the median asking rent for vacant for rent units was $1,228.
In the second quarter 2021, the median asking sales price for vacant for sale units was $238,600.
Approximately 89.0 percent of the housing units in the United States in the second quarter 2021 were occupied and 11.0 percent were vacant.
Owner-occupied housing units made up 58.2 percent of total housing units.
Renter-occupied units made up 30.8 percent of the inventory in the second quarter 2021.
Vacant year-round units comprised 8.3 percent of total housing units, while 2.7 percent were vacant for seasonal use.
Approximately 2.1 percent of the total units were vacant for rent.
0.5 percent were vacant for sale only and 0.8 percent were rented or sold but not yet occupied.
National Vacancy Rates
According to the U.S. Census Bureau, the national vacancy rates in the second quarter 2021 were 6.2 percent for rental housing and 0.9 percent for homeowner housing. The rental vacancy rate was 0.5 percentage points higher than the rate in the second quarter 2020 (5.7 percent) and 0.6 percentage points lower than the rate in the first quarter 2021 (6.8 percent). The homeowner vacancy rate of 0.9 percent was virtually the same as the rate in the second quarter 2020 (0.9 percent) and virtually the same as the rate in the first quarter 2021 (0.9 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.
The rental vacancy rate outside MSAs (6.9 percent) was higher than the rate in the suburbs (5.4 percent). The rate in principal cities (6.7 percent) was also higher than the rate in the suburbs. The rental vacancy rate was lowest in the West (4.8 percent), followed by the Northeast (5.6 percent). The rates were highest in the South (6.9 percent) and Midwest (7.3), and these two regions were not statistically different from each other. The rates in the Northeast and West were higher than their second quarter 2020 rates. The rates in the Midwest and South were not statistically different from the second quarter 2020 rates.
Courtesy of Census.gov
The Homeownership Rate
The homeownership rate of 65.4 percent was 2.5 percentage points lower than the rate in the second quarter 2020 (67.9 percent) and not statistically different from the rate in the first quarter 2021 (65.6 percent). The homeowner vacancy rate in principal cities (1.1 percent) was higher than the rate in the suburbs (0.8 percent) but not statistically different from the rate outside MSAs (0.9 percent).
The homeowner vacancy rate in the South (1.0 percent) was higher than the rate in the Midwest (0.7 percent). The rate in the Midwest is also lower than the rate in the Northeast (0.9 percent). The rate in the West was 0.8 percent. There were no other statistically significant differences between the regions. The rates in all regions were not statistically different from the second quarter 2020 rates.
The second quarter 2021 homeownership rate was highest in the Midwest (70.7 percent), followed by the South (67.1 percent), Northeast (61.8 percent), and West (60.1 percent). The homeownership rates in the Northeast, South, and West were lower than the rates in the second quarter 2020, while the rate in the Midwest was not statistically different.
Courtesy of Census.gov
References
Latest Housing Market Data & Statistics
http://www.freddiemac.com/research
https://www.nar.realtor/research-and-statistics/housing-statistics/
https://www.fhfa.gov/DataTools/Downloads/Pages/House-Price-Index.aspx
https://www.zillow.com/research/daily-market-pulse-26666/
http://www.freddiemac.com/research/forecast/20210715_quarterly_economic_forecast.page
https://www.nar.realtor/research-and-statistics/housing-statistics/housing-affordability-index
https://www.investopedia.com/personal-finance/how-millennials-are-changing-housing-market
Economic Outlook
https://www.bea.gov/data/gdp/gross-domestic-product
https://www.businessinsider.com/us-housing-market-sudden-lack-of-consumer-interest-coronavirus
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