US Housing Market Forecast 2021: Will It Crash or Boom?

Here are the latest housing market predictions and forecasts for 2021 & 2022. The global pandemic shattered the world order and the US economy suffered its biggest blow since the Great Depression in the second quarter. The housing market too briefly hit pause in spring due to uncertainty and widespread stay-home orders but 2020 was a record-breaking year in the residential real estate market.
Despite the pandemic-induced recession, house prices in all the major markets continue to rise. According to economists and market watchers, the residential real estate sector has been highly supportive of the economic recovery of the country so far. It has emerged as a pillar of support for the economy.
Although millions were laid off or furloughed it didn’t prevent house hunters from buying homes across the nation. As a result, the housing market saw the highest pace of sales growth since the height of the unprecedented housing boom in 2005. That expansion was driven by negligent lending in the subprime mortgage market and the current housing boom is driven by the intense demand and record-low mortgage rates.

Both of these factors were driven by the coronavirus pandemic. Housing prices had already started rising before the pandemic arrived but the pandemic created a rapid acceleration in double-digits. The housing market has seen record-breaking growth since June after briefly put on hold during the outbreak of the pandemic this spring. As prices keep climbing month-over-month, it just shows the resilience of the US housing market in the face of an ongoing economic recession.
Despite looming economic uncertainty, highly controversial elections, and the aggravated spread of the pandemic, home buyers continue to quickly snatch up the relatively few homes listed for sale. 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.
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 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. 
Will There Be An Housing Affordability Crisis?
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. 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.
Various national surveys (which you can read below) show that consumers are eager to spend more on housing in 2021, as the economy continues to slowly recover from the pandemic. Strong growth is expected in 2021 for housing sales, rents, and home prices. A report from the Federal Reserve Bank of New York found that the median household expects to increase their spending by 3.7% in the next twelve months, the most optimistic outlook since 2016.
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 show 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.
Mortgage Rates have hit a new record low in the first week of 2021. Mortgage applications increased 1.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending December 11, 2020. Despite a full percentage point decline in rates over the past year, housing affordability has decreased because the effect of lower mortgage rates (for buyers) is being evened out by double-digit home price growth.
According to some industry sources, rates are expected to rise modestly in 2021. 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. According to Bankrate’s latest survey of the nation’s largest mortgage lenders, the benchmark 30-year fixed mortgage rate is 2.840%.
According to Realtor.com, the December national median listing price was $340,000, up 13.4% compared to last year. Large metros saw an average price gain of 8.8% compared to last year. Assuming a buyer provided a 20% down payment, the principal and interest payments on the mortgage would have been $1,669 a month.
Contrast that with December 2019, when the median price was around $300K and the average interest rate on a 30-year mortgage was around 3.58%, according to Freddie Mac. A buyer faced a payment of $1,579, or $90 less a month than what he is paying now. Assume that builders and sellers had met buyer demand, keeping prices flat over the year. Lower mortgage rates would have resulted in a monthly payment of $1,482, or a savings of $97 a month as compared to a year before.
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. But if rates stay this way or possibly even go a little lower in 2021, then it will keep the homebuyers active and they would keep the housing market afloat. More and more homeowners (borrowers) can opt to refinance at today’s rates to cut their monthly mortgage payments.
Home Value Growth Hasn’t Ended Yet
Zillow Economic Research predicts that home values will increase by 3.6% in the next three months until Feb 2021. Another forecast is that home values will appreciate by 10.3% in the twelve months ending November 2021. The current 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.
Existing home sales also show the tightest housing market on record. We typically see a decline in demand and a big increase in time on the market before the end of November that points to a seasonal slowdown, but this demand has not gotten significantly shorter since May, and buyers and sellers are continuing to connect at a record pace.
If this trend continues, that’s a signal that the real estate market is going to remain sizzling hot even during the holiday season. This trend shows that the housing market is as strong as it was during the housing bubble. It is nowhere to close to a level where you can imagine the balance 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. The flow of buyers and sellers has remained abnormally high in the entire fall season. Not only the housing demand but the supply of new listings has also reached the highest point since the onset of the pandemic. Although sellers are listing more & more homes we need more new home supply to add to inventory and slow these sharp price increases.
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. The housing sales and prices have stayed strong through the summer months amid increasingly short inventory and high demand.
This strong buyer activity points to a fall & winter housing market that is more active than normal, where buyers may face more competition and may have to act more quickly than usual to snag their dream home. In the winter season, the sales and prices will continue to rise year-over-year but at a slower pace.
As was expected, real estate activity was much better this holiday season compared to last year. Realtor.com’s December 2020 housing data release shows that listing prices continued to increase at double-digit rates compared to last year, fueled by buyer demand, which also continued to snap up homes at a rate almost two weeks more quickly than last year. Extremely low mortgage rates contributed to demand and relative affordability.

National inventory declined by 39.6% over the last year and fell below 700,000 for the first time in their records.
The inventory of newly listed properties declined by 0.8% nationally and grew by 7.6% for large metros over the past year.
The December national median listing price was $340,000, up 13.4% compared to last year. Large metros saw an average price gain of 8.8% compared to last year.
Nationally, the typical home spent 66 days on the market in December, 13 days less than the same time last year.

With a shallower than normal pullback, the market is setting up for a strong start to 2021, especially if the new supply continues to improve. Buyer demand remains far more recovered than supply and continues to grow. With supply-constrained and demand boosted, house prices seem to rest on solid foundations for next year. They are likely to hold up even if there is a decline in transaction activity in the coming months.
In December, seller activity also improved, with new listings growing in many large markets, especially in the West and Northeast. The continued addition of new listings is much-needed to provide some relief to homebuyers in a tight housing market in the spring of 2021. Regionally, newly listed homes grew most in the West (+30.8% year-over-year) and Northeast (+15.0%), while remaining flat in the Midwest (+0.2%) and still in decline in the South (-4.0%).
The West’s combined average surge in new listings is primarily attributed to San Jose (+123.8%) and San Francisco (+98.9%), which saw far more new listings this December compared to 2019. Nationally, the inventory of homes for sale in December decreased by 39.6% over the past year, a slightly higher rate of decline compared to the 39.2% drop in November.
This steadiness suggests despite improvements in the trend of new sellers, the current trend gives no relief to buyers because it would not slow down the price growth. Steady declines in active inventory especially in the face of an improving new listings growth trend suggest that buyers are quickly putting offers on homes.
The housing market continues to favor sellers. With high interest from buyers and a limited flow of new listings, the total active listings have been lagging from the previous year. Homes are being sold at an increasingly fast pace when compared to the previous year. The typical home spent 66 days on the market this December, which is 13 days less than last year.
As new inventory comes on to the market. they are quickly taken out of the market from heavy buyer competition. Therefore, housing units are still in short supply with unsold inventory sitting at a 2.7-month supply at the current sales pace.
New Single-Family Housing Construction Trends
The NAHB gets input from builders on how confident they are in the housing market based on buyer behavior, sales, and incorporates any forecasts as well. The building permits have rebounded from pandemic lows and builders are racing to fill the gap between supply and demand.
Accelerated growth rates in home construction figures in November showcase the enduring strength of the housing and homebuilding markets and suggest that builders are overcoming the constraints that have limited activity in recent months. NAHB/Wells Fargo HMI index, which represents the builder sentiment, sat at a record high in November and pulled back only slightly in December.
Ending a string of three successive months of record highs, builder confidence in the market for newly-built single-family homes fell four points to 86 in December. HMI index was at an all-time high at 90 in November. Builder confidence levels have hit successive all-time highs over the past three months. It’s an indication that housing continues to lead the economy forward. Record low mortgage rates have boosted demand for new homes.
The HMI index gauging current sales conditions dropped four points to 92, the component measuring sales expectations in the next six months fell four points to 85 and the gauge charting traffic of prospective buyers also decreased four points to 73.
It is a diffusion index, which means that a reading above 50 indicates a favorable outlook on home sales as more builders view sales conditions as good compared with those who view them as poor. Below 50 indicates a negative outlook.
Looking at the three-month moving averages for regional HMI scores, the Northeast fell one point to 82, the Midwest was up one point to 81, the South rose one point to 87 and the West increased two points to 96.
“Housing demand is strong entering 2021, however, the coming year will see housing affordability challenges as inventory remain low and construction costs are rising,” said NAHB Chairman Chuck Fowke. “Policymakers should take note to avoid increasing regulatory costs associated with land development and residential construction.”
Land and material availability and a persistent skilled labor shortage will continue to place upward pressure on construction costs resulting in limited housing supply. As the economy improves with the deployment of a COVID-19 vaccine, interest rates will increase in 2021, further challenging housing affordability in the face of strong demand for single-family homes.
NAHB also noted that a shift toward suburban areas working in tandem with incredibly low-interest rates has kept builders busy. However, that may translate to higher costs and delays in receiving building materials, due to high demand, low supply, and 20 percent tariffs on Canadian supply. As the cost of lumber has soared to record highs many buyers are finding themselves priced out of the new-home market.
“Lumber prices are now up more than 170 percent since mid-April, adding more than $16,000 to the price of a typical new single-family home,” NAHB Chief Economist Robert Dietz said in a statement.
New Residential Home Sales: November 2020
Sales of existing home sales are at an all-time high but new home sales have also risen during the pandemic. Those sales are allowing builders to raise prices. Buyer traffic is converting into sales at a record rate. 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.
New single-family construction starts will fall slightly to 871,250 in 2020 before rising to 940,000 in 2021 and 975,000 in 2022, the highest level since 2006. In the meantime, 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.
Sales of new single-family houses in November 2020 were at a seasonally adjusted annual rate of 841,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 11.0 percent (±9.5 percent) below the revised October rate of 945,000 but is 20.8 percent (±19.5 percent) above the November 2019 estimate of 696,000.
The median sales price of new houses sold in November 2020 was $335,300. The average sales price was $390,100. The seasonally-adjusted estimate of new houses for sale at the end of November was 286,000. This represents a supply of 4.1 months at the current sales rate.
Courtesy of Census.gov
Till the time coronavirus pandemic exists it will lead to a see-saw recovery with ups and downs. Let us discuss in detail the various housing indices & their predictions for 2020 & 2021. We have updated this article with the latest housing market report from various credible sources like Realtor.com (check reference section).
National Multifamily Housing Trends
U.S. rental payment rates appear to be staying afloat. The National Multifamily Housing Council found 89.8 percent of apartment households made a full or partial rent payment by December 20 in its survey of 11.5 million units of professionally managed apartment units across the country.
This is a 3.4 percentage point, or 392,952 household decrease from the share who paid rent through December 20, 2019, and compares to 90.3 percent that had paid by November 20, 2020. These data encompass a wide variety of market-rate rental properties across the United States, which can vary by size, type, and average rental price.
Housing Market and Mortgage Delinquencies
To help borrowers at risk of losing their home due to the coronavirus national emergency, the Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac (the Enterprises) has extended the moratoriums on single-family foreclosures and real estate owned (REO) evictions until at least January 31, 2021, giving relief to more than 28 million homeowners with an Enterprise-backed mortgage.
Per the last three extensions, the FHFA said it will continue to monitor the effect of coronavirus on the mortgage industry and update its policies as needed. As of now record-low mortgage rates and shortage of inventory are keeping the US housing market strong concerning buyer demand. Both prices and sales have been surging month-over-month breaking new records.
Mortgage delinquencies improved Again in November 2020 but nearly 2.2 million seriously past-due mortgages remain, according to the latest data released by Black Knight.

Despite seasonal headwinds, mortgage delinquencies improved for the sixth consecutive month in November 2020, falling to 6.33% from 6.44% in the month prior.
The national delinquency rate is now down 1.5 percentage points from its peak of 7.8% in May but remains a full three percentage points (+93%) above pre-pandemic levels.
While early-stage delinquencies – borrowers with one or two payments past due – have fallen back below pre-pandemic levels, seriously past-due (90+ days) mortgages remain 1.8 million above pre-pandemic levels.
Foreclosure activity remains muted as widespread moratoriums remain in place.
November’s 4,400 foreclosure starts and 176,000 loans in active foreclosure are both at their lowest levels on record since Black Knight began reporting the metrics in 2000.
Prepayments fell 11% from October’s 16-year high; however, with interest rates at record lows and refinance incentives at an all-time high, prepay activity is likely to remain elevated in the coming months.

ATTOM Data Solutions, licensor of the nation’s most comprehensive foreclosure data released its November 2020 U.S. Foreclosure Market Report, which shows there were a total of 10,042 U.S. properties with foreclosure filings — default notices, scheduled auctions, or bank repossessions in November 2020, down 14 percent from a month ago and down 80 percent from a year ago.
While there was a decline in foreclosure, the houisng markets where people are moving from urban areas to the suburbs – like New York City, Chicago, and Miami – were among the markets with the highest levels of foreclosure actions. Florida, Illinois, and Oklahoma post the highest state foreclosure rates.
Nationwide one in every 13,581 housing units had a foreclosure filing in November 2020. A total of 5,256 U.S. properties started the foreclosure process in November 2020, down 13 percent from last month and down 79 percent from a year ago. While foreclosure starts are down in many states across the nation, a few states did see monthly increases in foreclosure starts in November 2020, including Missouri (up 18 percent), Indiana (up 14 percent), Georgia (up 4 percent), Arizona (up 1 percent), and Texas (up 1 percent).
Among metropolitan areas with a population greater than 1 million, those with the greatest number of foreclosure starts in November 2020 were New York, NY (454 foreclosure starts); St. Louis, MO (208 foreclosure starts), Chicago, IL (207 foreclosure starts); Miami, FL (151 foreclosure starts); and Los Angeles, CA (147 foreclosure starts).
Lenders foreclosed (REO) on a total of 2,010 U.S. properties in November 2020, down 22 percent from last month and down 86 percent from a year ago.

 
As you read further, we have collected some data from credible sources that show how the US housing market is recovering week after week from the blows of the pandemic. 
Housing Market Crash: Is a Crash Coming in 2021?
The US housing market is far from crashing in 2020 or 2021. 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.
Historically, 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, according to the Fannie Mae Economic and Strategic Research (ESR) Group.
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. Let’s first see how various consumer surveys are responding in wake of this crisis.
The Fannie Mae Home Purchase Sentiment Index® (HPSI) is a good indicator of the houisng recovery and buyer and seller behavior. The index measures housing attitudes, intentions, and perceptions, using six questions from the National Housing Survey® (NHS). It fell 1.7 points in November to 80.0, the first decline after three consecutive months of increases since late spring.
Year over year, the HPSI is still down 11.5 points but it has recovered more than half (60%) of the early pandemic-period decline, mirroring the strong home purchase activity of the past few months.
Three of the six HPSI components decreased month over month, with consumers reporting a more pessimistic view of homebuying conditions, including mortgage rate expectations, but a more optimistic view of home-selling conditions and home prices. Moreover, consumers also reported mixed results regarding job loss concerns and household income changes.
“The HPSI appears to have peaked for now as consumers continue to consider how COVID-19 impacts their ability to buy or sell a home,” said Doug Duncan, Senior Vice President, and Chief Economist. “This follows the HPSI’s recovery of slightly more than half of the loss experienced during the first few months of the pandemic.”
The latest survey finds out the percentage of respondents who think it’s a ‘good/bad time to sell a home’ vs those who think it’s a ‘good/bad time to buy a home’.

Good/Bad Time to Buy: The percentage of respondents who say it is a good time to buy a home decreased from 60% to 57%, while the percentage who say it is a bad time to buy remained the same at 35%. As a result, the net share of Americans who say it is a good time to buy decreased 3 percentage points month over month.
Good/Bad Time to Sell: The percentage of respondents who say it is a good time to sell a home remained the same at 59%, while the percentage who say it’s a bad time to sell decreased from 35% to 33%. As a result, the net share of those who say it is a good time to sell increased 2 percentage points month over month.
Home Price Expectations: The percentage of respondents who say home prices will go up in the next 12 months increased this month from 40% to 41%, while the percentage who say home prices will go down decreased from 20% to 13%. The share who think home prices will stay the same increased from 31% to 35%. As a result, the net share of Americans who say home prices will go up increased 8 percentage points month over month.

The Federal Reserve Bank of New York’s Center for Microeconomic Data released the November 2020 Survey of Consumer Expectations, which shows that despite flat income and earnings growth expectations, households’ year-ahead spending growth expectations rose sharply in November to 3.7%, the highest level recorded in more than 4 years.

Median inflation expectations increased 0.2 percentage points in November to 3.0% at the one-year horizon and increased 0.1 percentage points to 2.8% at the three-year horizon.
The increase in the short-term measure was driven mostly by younger respondents (below the age of 60), more educated (bachelor’s degree or higher), and with higher household income (over $100,000). 
Median year-ahead home price change expectations decreased 0.1 percentage point to 3.0% in November. This is the first monthly decline in the series since April 2020 when it reached its lowest level of 0%.
The decline was recorded in all Census regions except the Northeast.
Median one-year ahead expected earnings growth remained flat in November at 2.0%, below its 2019 average level of 2.3%. This is the fifth consecutive month that the series has remained unchanged.
Mean unemployment expectations—or the mean probability that the U.S. unemployment rate will be higher one year from now—increased for the first time since July 2020, from 35.4% in October to 40.1% in November.
The median expected household income growth stayed flat in November at 2.1%, well below its 2019 average of 2.8%.
Mean unemployment expectations—or the mean probability that the U.S. unemployment rate will be higher one year from now—increased for the first time since July 2020, from 35.4% in October to 40.1% in November.
Perceptions about households’ current financial situations compared to a year ago remained essentially unchanged in November.
In contrast, respondents were more pessimistic about their households’ financial situations in the year ahead, with more respondents expecting their financial situation to deteriorate, and fewer respondents expecting an improvement in their financial situation.
The mean perceived probability that U.S. stock prices will be higher 12 months from now decreased 2.3 percentage points to 38.5% in November, its lowest level since August 2019.

Zillow’s market pulse report dated December 18, 2020, home values are growing at their fastest pace yet — and that pace is set to accelerate further in the coming year. Sales volumes will continue their recent surge as well. Mortgage rates remain very low and look likely to stay there. And home construction activity ticked up in November.

Home values in November increased 1.1% from October and 3% from three months before, both records.
The 1.1% monthly increase in the U.S. Zillow Home Value Index in November was the strongest one-month rate of appreciation since at least 1996 when their records began.
Given enduring and elevated levels of demand for homes, sharp increases in home values and strong sales volumes are likely to continue in the months to come.
Zillow Economic Research predicts that home values will increase by 3.6% in the next three months (from November to February 2021).
The next forecast is that home values will increase by 10.3% in the twelve months ending November 2021. 
The current forecast also calls for sales volume to remain elevated in the coming year, finishing 2021 at 6.9 million sales, the most since 2005.
Mortgage rates fell slightly this week after the Federal Reserve reaffirmed its plans to keep benchmark rates low and maintain its pace of bond purchases.
Applications for home purchase loans ticked up 2% on the week.
November housing starts were up 1.2% from October and 12.8% from a year ago, to 1.547 million (SAAR), according to the U.S. Census Bureau.
Housing permits rose 6.2% month-over-month and 8.5% year-over-year in November, to 1.639 million (SAAR).
After two monthly declines in the past three releases, a strong increase in permits indicates builders are breaking free from the restrictions that have hindered the industry of late and appear prepared for increased activity in the months ahead.

Realtor’s Housing Market Recovery Index Foresees No Crash
According to Realtor.com’s latest recovery report, the Housing Market Recovery Index increased to 112.1 nationwide for the week ending December 12th, up 1.7 points over the prior week. Housing activity saw a boost compared to the same time in the previous year and the demand is set to break more records in December.

Houisng Market Recovery: Week ending 12/12/2020
Current Index
w/w change
No. of consecutive weeks above recovery (base value of 100)

Overall Housing Recovery Index
112.1
+1.7
22

Housing Demand Growth Index
129.6
+5.7
32

Listing Price Growth Index
109.7
-0.2
28

New Supply Growth Index
106.1
+5.4
5

The pace of Sales Index
114.7
-1.5
21

The graph below charts the index by showing how the real estate market started strong in early 2020, and then dropped dramatically at the beginning of March when the pandemic paused the economy. It also shows the strength of the recovery since the beginning of May. A V-shaped recovery can be seen.
Credits: Realtor.com (Housing Market Recovery Index)
The housing index is pegged to a starting point of 100 at a particular year. And then they can just track whether things are improving or declining from that reference point. It’s similar to any other index where you have a starting point or a starting year and you peg it at a hundred and it just goes up and down from there.
It went up for most of March, and then it hit this peak and came down rapidly and fast over the course of essentially the end of March, April, and right through to the beginning of May where it bottomed out. So after May 1st, that index started to go up, it passed 85 in mid-May and then continue to work its way up rather quickly.
The recovery index had reached 106.6 nationwide for the week ending July 18, bringing the index above the pre-COVID recovery benchmark for the first time since March, and then it just kept going up from there. As of December 12, it is now 12.1 points above the pre-COVID baseline and up 1.7 points over the prior week.
The realtor.com Housing Demand component – which tracks growth in online home searches nationwide – increased to an index-high of 129.6, up 5.7 points over last week. The overall recovery index is showing the greatest recovery in Seattle, Los Angeles, Boston, San Jose, and San Francisco, largely driven by improvements to the inflow of both buyers and sellers. This week, only Miami and Birmingham remained below the baseline.
The Recovery Index in the 50 largest metros increased across most metros, driven by improvements in both demand and supply. Seller activity remains variable but the trend in new listings has improved for the second week in a row, while demand for homes has also improved across all regions.

Region
Avg Recovery Index For The Week Ending 12/12/2020
Weekly
Change

West
122.0
+2.4

South
108.7
+2.6

Northeast
111.6
-3.0

Midwest
108.6
+3.5

Are Housing Prices Increasing or Decreasing?
This year, the inflow of buyers and sellers remained abnormally high in December. The ‘home price’ component remained steady at 109.7 points this past week, 9.7 points above the January baseline and down only 0.2 points over the prior week. With supply at record lows and buyer competition showing continued strength, sellers have newfound leverage, enabling the fastest listing price growth recorded in more than two years.
Although the fastest price growth has been recorded since January 2018 it is yet to be seen whether higher asking prices will translate into higher selling prices. A seller would always prefer sales to a list price ratio of 100% or more. As inventory and foot traffic decline through the winter season, we’ll get a clear indication of this ratio.
Locally, 29 of the 50 largest markets seeing growth in asking prices surpass the January baseline, five more than the previous week. In the top 10 most-recovered markets, asking prices are growing at 13 percent year-over-year, on average. The most recovered markets for home prices include Austin, Riverside-San Bernardino, New Orleans, Houston, and Portland; with a home price growth index between 112 and 116.
Is The Housing Demand Increasing or Decreasing?
According to the demand index tracked by Realtor.com, the ‘housing demand’ component – which tracks growth in online home searches – increased to 129.6, an increase of 5.7 points over the prior week. While record-high prices, short supply, and economic headwinds pose significant challenges, the lineup of buyers has not gotten significantly shorter since May.
The housing demand is still very high but its rate of increase is expected to slow down in the coming few months before it surges back in the Spring of 2021.
Regionally, all the 50 markets are positioned above the recovery trend, the same as the previous week, as buyer demand remains strong heading into the December holidays. The most recovered markets for home-buying interest include Austin, Miami, Sacramento, San Francisco, and New York; with a housing demand growth index between 147 and 162.
Is Housing Supply Increasing or Decreasing?
In the first week of August, the index had managed to reach the January baseline for the first time as more sellers re-entered the market but it was a temporary boost in new listings which weakened later in August. The housing supply index, which measures the growth of new listings, showed a more convincing improvement this week.
It increased to 106.1, up 5.4 points over the prior week, and is now at 6.1 points above the January baseline. This is a good sign for buyers who are struggling with tight inventory. A sustained rebound in newly listed homes for sale remains elusive and highly localized but this week’s improvement is encouraging. The housing supply will need to carry consistent momentum forward to balance the relentless growth in demand.
No one knows whether sellers would continue to list the properties in the winter season or back out once again due to the rise in coronavirus cases and the coming festive holidays. This suggests that the normal seasonal slowdown in buying activity may finally be taking place in winters. Further improvement in the housing supply could be limited going into the winter season as the peak cycle subsides.
The next few weeks in December will be key in how the market could resist the usual seasonal decline in new listings throughout the winters. A failure of new listings to improve beyond the current pace could prove to be an obstacle for further sales improvements, given their strong correlation with sales.
Will sellers choose to go against the usual seasonal decline in new listings? What do you think? Regionally, 33 of the 50 largest markets saw the new listings index surpass the January baseline, seven more than last week. Interestingly, markets, where new supply is improving the fastest, tend to be higher priced than those that have yet to see improvement, suggesting sellers are more active in the more expensive markets.
The most recovered markets for new listings included San Jose, San Francisco, Seattle, Boston, and Las Vegas; with a new listings growth index between 148 and 176.
These local housing supply trends show that sellers were returning faster in the more expensive housing markets. More homes being listed for sale in areas with wealthier demographics goes some way to explain the strength of the housing market at a time of recession and rising unemployment.
Are Housing Sales Increasing or Decreasing?
Home sales are recovering from the setback of the coronavirus led crisis with fall becoming the peak homebuying season. The housing sales are predicted to recover at a faster rate in this quarter. The pace of sales component – which tracks differences in time-on-market – remains well above the pre-COVID baseline at 114.7 but decreased by 1.5 points over the past week.
Nevertheless, the ‘pace of sales’ measure continues to remain 14.7 points above the January baseline, as buyers and sellers are continuing to connect at a record pace going into the holidays. In other words, homes are selling faster going into the holidays. 45 of the 50 largest markets are now seeing the time on market index surpass the January baseline, the same as the previous week. In the top 10 most recovered markets for the pace of sales, time-on-market is now down 23 percent, on average, year-over-year.
The most recovered markets for time-on-market include Los Angeles, Louisville, Virginia Beach, Portland, and Las Vegas; with a pace of sales growth index between 133 and 162.
Are Housing Rents Increasing or Decreasing?
The typical U.S. rent was up 1.1% year-over-year in November, to $1,734, down from 3.9% growth in February but a decent bounce-back from weak 0.7% annual growth in October, according to the real estate website Zillow.
Among the 50 largest markets, the biggest monthly declines were in Seattle (-1.1%), Milwaukee (-1.0%), and Chicago (-0.8%). Weakness in those two large midwestern metros is somewhat of a departure from prior months when expensive coastal metros including San Francisco and New York have the largest declines.
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.
Courtesy of Zillow.com
Apartment Guide’s October 2020 Rent Report highlights year-over-year rent trends and price fluctuations that renters may be experiencing in various parts of the United States. According to this report, rent prices have increased modestly year-over-year except for studio apartments, which have decreased.
One-bedroom apartments were more expensive than studios by a small margin — a contrast to past comparisons when studios have sometimes been more expensive.  Studio prices are down year-over-year — and down 6 percent from where they were over the summer Larger rentals, from one-bedroom to three-bedroom units, are more expensive than they were a year ago by 3 to 7 percent.
Here are the regional highlights of the rental market.

The West is the only region where rent prices are down on all unit types
The South is the only region where rent prices are up for all unit types
The Midwest is the only region where rent prices are flat or in close vicinity on all unit types
The Northeast is the only region that is experiencing more variable pricing swings by unit type
In three of the four regions, prices on two-bedroom units are up year-over-year
Eight cities — Boston, Jersey City, Los Angeles, New York, Oakland, San Diego, San Francisco, and San Jose, are in the 10 most expensive markets across all bedroom types
One of those cities, San Francisco, is experiencing across-the-board rent decreases

Here’s the national average rent price per unit type over the past three years:

Bedrooms
2020
2019
2018

Studio
$1,605
$1,629
$1,570

1BR
$1,617
$1,605
$1,595

2BR
$1,909
$1,854
$1,826

3BR
$2,050
$2,014
$1,949

According to Zumper’s National Rent Report (November 2020), overall, the national 1-bedroom median rent decreased 0.5% last month to $1225, while the 2-bedroom median decreased 0.4% to $1483. In year-to-date terms, the 1-bedroom median was flat and the 2-bedroom median increased 0.3%.
The gap in median prices between historically expensive rental markets and cheaper ones continued to decrease last month but slowed slightly. The standard deviation of median 1-bedroom prices in the top 100 cities has decreased by 19% from a year ago
Rents are falling across most major cities, such as San Francisco, CA (-20.7%); Oakland, CA (-19.2%); New York City, NY (-15.0%); Seattle, WA (-14.9%); Washington DC (-14.8%); San Jose, CA (-13.5%); Los Angeles, CA (-13.0%); Boston, MA (-12.6%); Denver, CO (-12.5%); Irving, TX (-10.7%); Wichita, KS (-10.4%); Corpus Christi, TX (-8.9%); and Plano, TX (-8.4%)., forcing landlords to offer incentives to attract tenants after an exodus from urban areas.
These big cities are losing demand because people are having a hard time finding jobs during the pandemic and are forced to move back in with their families. However, there is some indication the decreases have slowed down as compared to the previous month.
Top 5 Rental Markets in the US

San Francisco, CA: 1-bedroom median price dropped 1.1% from the month before $2800. The 2-bedroom median dropped 2.9% to $3690. Both the 1-bedroom and 2-bedroom medians were down about 21% from last year.
New York, NY: 1-bedroom median price dropped 1.9% from the month before $2550, and the 2-bedroom median decreased 3.0% to $2900. The 1-bedroom median and 2-bedroom median were down 15.0% and 17.1% from last year, respectively.
Boston, MA: 1-bedroom median price was down 3.9% from the month before $2210. The 2-bedroom median rent dropped 4.3% to $2680. The 1 and 2-bedroom medians dropped 12.6% and 8.5% from last year, respectively.
San Jose, CA: 1-bedroom median decreased 4.9% to $2120 from the month prior and the 2-bedroom median decreased 3.2% to $2680. 1 and 2-bedroom medians decreased by 13.5% and 9.2% from last year, respectively.
Oakland, CA was the 5th priciest rental market with the 1-bedroom median decreasing 5.2% from the prior month to $2020, and the 2-bedroom median decreased 2.6% from the prior month to $2630. Oakland 1 and 2-bedroom medians decreased by 19.2% and 12.3%, respectively.

Credits: Zumper National Rent Report
RESIDENTIAL VACANCIES AND HOMEOWNERSHIP RATES IN 2020 (Third Quarter)
Vacancy rates affect the price of housing. In a market in which there are a lot of vacant homes or apartments, prospective tenants or buyers are at an advantage. On the other hand, in a market in which vacant homes or apartments are scarce, the power dynamic is reversed. The landlords (or sellers) are in a position to tend to bid up the rents.
Therefore, when there is an unusually low vacancy, the price of housing will tend to be bid up over time. When there is an unusually high vacancy, the price of housing will tend to be bid down over time.
Let us see how this pandemic led economic slowdown has impacted the vacancy rates nationally as well as regionally. The vacancy rate is somewhat analogous to the unemployment rate. If the unemployment rate increases, it has a direct impact on vacancy rates, just as what happened this year since March.
COVID-19 continues to limit economic activity, yielding higher apartment vacancies, and lower overall rent growth. The Census Bureau reports rental vacancy and homeownership vacancy rates each year through its American Community Survey; you can get these at the city level or in some cases for even more fine-grained areas.
According to the U.S. Census Bureau, the homeowner vacancy rate in 2019 was 1.3%, and the rental vacancy rate at approximately 6.8%. In the third quarter of 2020, the national vacancy rates were 6.4 percent for rental housing and 0.9 percent for homeowner housing.
Approximately 89.9 percent of the housing units in the United States in the third quarter of 2020 were occupied and 10.1 percent were vacant. Owner-occupied housing units made up 60.6 percent of total housing units, while renter-occupied units made up 29.3 percent of the inventory in the third quarter of 2020.
It is interesting to see that the rental vacancy rate of 6.4 percent was 0.4 percentage points lower than the rate in the third quarter of 2019 (6.8 percent) and 0.7 percentage points higher than the rate in the second quarter of 2020 (5.7 percent).
And the homeowner vacancy rate of 0.9 percent was 0.5 percentage points lower than the rate in the third quarter of 2019 (1.4 percent) and virtually unchanged from the rate in the second quarter of 2020 (0.9 percent).
On the other hand, the homeownership rate of 67.4 percent was 2.6 percentage points higher than the rate in the third quarter of 2019 (64.8 percent) and not statistically different from the rate in the second quarter of 2020 (67.9 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. In the third quarter of 2020, the rental vacancy rate was the highest in Metropolitan Statistical Areas (7.5) percent. Also, it was not statistically different principal cities (7.0 percent).
But suburbs had the lowest rental vacancy rate of 5.5 percent, 1.5 percentage points lower than principal cities. According to The New York Times, an estimated 5% of New York City residents and 18% of Manhattanites alone left the city between March and May. Suburbs like Westchester, Long Island, and North Fork have become other popular sanctuaries inside New York State.
This combination of high demand and low supply has driven prices higher in the suburbs. As affluent New Yorkers are buying houses in suburbs, the real estate market in those areas has prospered. In Manhattan, however, the median rental price decreased by 3.9% between August 2019 to August 2020, and the vacancy rate has increased by 3.15%.
The third quarter 2020 rental vacancy rate in the Northeast (5.6 percent) was lower than the rates in the Midwest (6.9 percent) and South (7.6 percent), but it was not statistically different from the rate in the West (5.1 percent).
The rental vacancy rates in the Midwest and South were higher than the rate in the West, and there was not a significant difference between the rates in the Midwest and South.
The rental vacancy rate in the South was lower than the third quarter 2019 rate, while the rental vacancy rates for the Northeast, Midwest, and West were not statistically different from the third quarter 2019 rates.
Courtesy of Census.gov
The third quarter 2020 homeownership rates in the Midwest (71.2 percent) and South (70.8 percent) were higher than the rates in the Northeast (62.0 percent) and West (62.1 percent). The rates in the Midwest and South were not statistically different from each other, nor were the rates in the Northeast and West. The homeownership rates in the Midwest, South, and West were higher than the rates in the third quarter of 2019, while the rate in the Northeast was not statistically different.

Housing Market Summary Report For December 2020
The housing market before the pandemic 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.
According to the National Association of Realtors®, overall sales decreased year-over-year, down 17.2% (4.33 million units in April 2020) from a year ago (5.23 million in April 2019). The national median existing single-family home price in the first quarter of 2020 was $274,600, up 7.7% from the first quarter of 2019 ($254,900). Housing market data of the last month showed that it is beginning to heat up again as more sellers and buyers enter the market.
Realtor.com’s latest national housing report shows that it is an unusually active buying season. The typical fall seasonal slowdown, which was bucked in October, is finally starting to take shape in November, with the nation’s median home listing price being slightly lower than last month, and homes spending slightly longer on the market.
However, listing price growth continued to increase at double-digit rates compared to last year. Homes continued to sell almost two weeks more quickly than last year. Despite a seasonal slowdown and strong new listing growth in select markets, inventory continues to decrease, still posing a challenge for buyers in this late fall season.
Housing Market Supply Trends
Nationally, the inventory of homes for sale in December decreased by 39.6% over the past year, a slightly higher rate of decline compared to the 39.2% drop in November and 38.3% drop in October. This amounted to 449,000 fewer homes for sale compared to December of last year, and a new low of less than 700,000 active listings for the first time in Realtor.com’s records.

However, seller activity saw some improvement in December, when sellers listed new homes for sale at a rate almost the same as the previous year. The count of newly listed properties decreased by a mere 0.8% since last year, a deceleration from the 8.7% loss reported in November.
Declining total for-sale inventory when sellers are listing homes roughly on pace with a year ago suggests that buyers are still very active in the housing market, perhaps looking to lock-in record-low mortgage rates. This improvement in new listings is still not enough to mark it as a buyer’s real estate market and it going to continue to be difficult for buyers to find their perfect home, while sellers who face little competition amongst each other may find selling their home easier this fall season than is typical.
Housing inventory in the 50 largest U.S. metros overall declined by 38.6% over last year in December, a slight improvement from last month’s 38.9% decline. Regionally, newly listed homes grew most in the West (+30.8% year-over-year) and Northeast (+15.0%), while remaining flat in the Midwest (+0.2%) and still in decline in the South (-4.0%).
The West’s combined average surge in new listings is primarily attributed to San Jose and San Francisco, which saw far more new listings this December compared to 2019. Expensive tech markets are seeing the greatest increase in seller activity. The top 3 metros which saw the biggest annual gains in newly listed homes include San Jose (+123.8%), San Francisco (+98.9%), and Boston (+50.9%). 
Markets that are still seeing the largest decline in newly listed homes include Nashville (-19.9%), Memphis (-18.5%), and Charlotte (-16.0%). However, all three of these markets have seen the rate of decline improve compared to last month. Overall, newly listed homes in the largest 50 metros increased by 7.6% compared to last year.
According to the National Association of Realtors®, the total number of homes available for sale continued to be constrained in November as well. Unsold inventory sits at an all-time low 2.3-month supply at the current sales pace, down from 2.5 months in October and down from the 3.7-month figure recorded in November 2019.

Properties typically remained on the market for 21 days in November, seasonally even with October, and down from 38 days in November 2019. Seventy-three percent of homes sold in November 2020 were on the market for less than a month.

Total housing inventory at the end of November totaled 1.28 million units, down 9.9% from October and down 22% from one year ago (1.64 million). 

Total housing inventory at the end of October totaled 1.42 million units, down 2.7% from September and down 19.8% from one year ago (1.77 million).

Total housing inventory at the end of September totaled 1.47 million units, down 1.3% from August and down 19.2% from one year ago (1.82 million). 

Total housing inventory at the end of August totaled 1.49 million units, down 0.7% from July and down 18.6% from one year ago (1.83 million). 

Total housing inventory at the end of July totaled 1.50 million units, down from both 2.6% in June and 21.1% from one year ago (1.90 million).

Total housing inventory at the end of June totaled 1.57 million units, up 1.3% from May, but still down 18.2% from one year ago (1.92 million).

Total housing inventory at the end of May totaled 1.55 million units, up 6.2% from April, and down 18.8% from one year ago (1.91 million).

Total housing inventory at the end of April totaled 1.47 million units, down 1.3% from March, and down 19.7% from one year ago (1.83 million).

Housing Price Trends
The houisng market continued to show signs of a seasonal slowdown in December, however, the year-over-year growth rate in the median listing price was still a slight acceleration from the 12.7% growth seen in November. The median national home listing price grew by 13.4% over last year, to $340,000 in December.

In October, the median listing price held steady at the summer 2020 high of $350,000, resisting the usual seasonal decline for the first time in Realtor.com’s recorded data history. Had there been no pandemic this year, prices would have normally dropped 1-4% from summer’s price peak by October.
The nation’s median listing price per square foot also grew by 15.9% compared to last year, an acceleration from the 15.4% growth seen last month. In April & May, the nation’s median listing price growth had deaccelerated, driven by diminished seller expectations and a shift in the mix of homes for sale.
The following is a tabulated summary of the National Listing Price Trends from March 2020 to December 2020 on Realtor.com.

National Housing Price Trends

In the first two weeks of March, the median listing prices were increasing 4.4 percent year-over-year on average.

The median list price on pending contracts in the four weeks through April 26 was up 2.6% from one year ago.

The April national median listing price was $320,000, up 0.6 percent year-over-year.

This was a further deceleration from the 3.8 percent year-over-year growth seen in March.

In the three weeks of May ending May 9, May 16, and May 23, the median national listing price posted an increase of 1.4 percent, 1.5 percent, and 3.1 percent year-over-year, respectively.

Locally, 77 of 100 large metros saw asking prices increase over last year.

In May 2020, the median national home listing price grew by 1.6 percent year-over-year, to a new high of $330,000.

This is a re-acceleration from the 0.6 percent year-over-year growth seen in April.

In June, the median national home listing price grew by 5.1 percent year-over-year, to a new high of $342,000.

This is an acceleration from the 1.6 percent year-over-year growth seen in May.

The nation’s median listing price per square foot also grew by 7.7 percent year-over-year, an acceleration from the 5.4 percent growth seen last month.

The July national median listing price was $349,000, up 8.5 percent year-over-year. Prices rose 7.8 percent in larger markets.

This is an acceleration from the 5.1 percent year-over-year growth seen in June.

The nation’s median listing price per square foot also grew by 9.5 percent year-over-year, an acceleration from the 7.7 percent growth seen in June.

The median national home listing price grew by 10.1 percent year-over-year, to a new high of $350,000 in August.

This is an acceleration from the 8.5 percent year-over-year growth seen in July.

The median national home listing price grew by 11.1% over last year, to $350,000 in September.

This is an acceleration from the 10.1% growth seen in August.

The nation’s median listing price per square foot also grew by 13.9% compared to last year.

In October, the median national home listing price grew by 12.2% over last year, to $350,000.

This is an acceleration from the 11.1% growth seen in September.

The nation’s median listing price per square foot also grew by 14.7% compared to last year.

In November, the median national home listing price grew by 12.7 percent year-over-year, to $348,000.

The nation’s median listing price per square foot also grew by 15.4% compared to last year.

In December, the median national home listing price grew by 13.4 percent year-over-year, to $340,000.

The nation’s median listing price per square foot also grew by 15.9% compared to last year.

Listing prices in the nation’s largest metros grew by an average of 8.8% compared to last year, the same as last month. Among the largest 50 metros, prices are increasing most in northeastern markets, where they are now growing at an average rate of 12.2% over last year, compared to a growth rate of 10.4% for western metros, 8.6% for midwestern metros, and 6.7% for southern metros.
Austin (+20.0%), Riverside-San Bernardino (17.2%), and New Orleans (+16.8%) posted the highest year-over-year median list price growth in December. Minneapolis was the only metro on our list of the largest 50 which saw declining prices. Its median listing price fell by 1.6% year-over-year in December.

Highest Year-Over-Year Price Gains
Highest Year-Over-Year Price Declines

May
Los Angeles-Long Beach-Anaheim, CA (+14.9%)
Detroit-Warren-Dearborn, MI (-3.4%)

Pittsburgh, PA (+14.0%); and Cincinnati, OH-KY-IN (+12.1%)
San Antonio-New Braunfels, TX (-3.2%)

—
Seattle-Tacoma-Bellevue, WA (-3.1%)

June
Pittsburgh, PA (+23.8%)
Miami-Fort Lauderdale-West Palm Beach, FL (-2.3%)

Los Angeles-Long Beach-Anaheim, CA (+21.4%)
Jacksonville, FL (-0.8%)

Cincinnati, OH-KY-IN (+16.6%)
Dallas-Fort Worth-Arlington, TX (-0.7%)

July
Pittsburgh, PA (+25.0%)
Miami-Fort Lauderdale-West Palm Beach, FL (-1.5%)

Los Angeles-Long Beach-Anaheim, CA (+24.3%)
Orlando-Kissimmee-Sanford, FL (-0.9%)

Cincinnati, OH-KY-IN (+18.5%)
—

August 
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD (+18.6 percent)
Miami-Fort Lauderdale-West Palm Beach, FL (-0.2 percent)

Cincinnati, OH-KY-IN (+17.8 percent)
—

Cleveland-Elyria, OH (+15.6 percent)
—

September 
Cincinnati, OH-KY-IN (+16.9%)
—

Boston-Cambridge-Newton, MA-NH (+16.4%)
—

Philadelphia-Camden-Wilmington, PA-NJ-DE-MD (+15.6%)
—

October 
Los Angeles (+16.9%)
—

Philadelphia (+16.7%)
—

Cincinnati (16.3%)
—

November 
Austin (+20.0%)
—

Los Angeles (+16.1%)
—

Riverside-San Bernardino (15.9%)
—

December 
Austin (+16.9%)
Minneapolis (-1.6%)

Riverside-San Bernardino (17.2%)
—

New Orleans (+16.8%)
—

Housing Market Sales Trends
Homes for sale in December were being scooped up more quickly than last year, as buyer demand continues to spill over into the holiday season. Homes are still spending less time on the market compared to the same time last year. The typical home spent 66 days on the market this December, which is 13 days less than last year.
In the 50 largest U.S. metros, the typical home spent 56 days on the market, and homes spent 12 days less on the market, on average, compared to last December. Among these 50 largest metros, the time a typical property spends on the market has improved at similar rates across all four regions.
In the Midwest and South, properties now typically spend 13 fewer days on the market than last year, in northeastern markets the typical property spends 12 fewer days on the market, and in western metros, the typical property spends 11 fewer days on the market.
Among larger metropolitan areas, homes saw the greatest decline in time spent on the market compared to last year in Virginia Beach (-28 days); Hartford (-23 days); and Louisville (-23 days). Only four markets saw time on the market increase compared to the previous year.
These four markets were San Diego (+6 days), Miami (+5 days), Buffalo (+3 days), and New York (+2 days). Despite the large inflow of new listings in San Jose and San Francisco, homes in these markets are still selling at an increasingly fast pace compared to last year.
Home sales generally pick up in the spring-summer season. People start shopping for new homes around Spring Break with the hope of moving over holiday weekends like Memorial Day weekend or moving during the summer when it has the least impact on their kids’ education. This is why housing market predictions always include an increase in sales between March and September.
The federal government’s shutdown of so-called non-essential businesses put a hold on most real estate transactions. The existing-home sales marked a three-month decline in sales (March to May) as a result of the coronavirus outbreak. This is the first time homes in October sold more quickly than in September since Realtor.com began tracking this data in 2016.
Existing-home sales decreased in November to a seasonally-adjusted annual rate of 6.69 million – down 2.5% from the prior month, but up 25.8% from one year ago, according to the National Association of Realtors®. Home sales, which had gone on a declining spree due to social distancing & economic unpredictability, have now surpassed the pre-COVID levels.

All major regions either took a step back or held steady in terms of their respective month-over-month status, but each of the four areas experienced significant year-over-year growth. Total existing-home sales completed transactions that include single-family homes, townhomes, condominiums, and co-ops, decreased 2.5% from October to a seasonally-adjusted annual rate of 6.69 million in November. However, sales in total rose year-over-year, up 25.8% from a year ago (5.32 million in November 2019).
Single-family home sales sat at a seasonally-adjusted annual rate of 5.98 million in November, down 2.4% from 6.13 million in October, and up 25.6% from one year ago. The median existing single-family home price was $315,500 in November, up 15.1% from November 2019.
Existing condominium and co-op sales were recorded at a seasonally-adjusted annual rate of 710,000 units in November, down 2.7% from October and up 26.8% from one year ago. The median existing condo price was $271,400 in November, an increase of 9.5% from a year ago.

Housing Sales By Region – November 2020 (By N.A.R.)

Northeast
Existing home sales dropped 2.2%, recording an annual rate of 880,000, a 25.7% increase from a year ago.

The median price in the Northeast was $354,100, up 17.4% from November 2019.

Midwest
Existing-home sales fell 2.5% to an annual rate of 1,590,000 in November, but up 24.2% from a year ago.

The median price in the Midwest was $239,100, a 14.6% increase from November 2019.

South
Existing-home sales decreased 3.8% to an annual rate of 2.82 million in November, up 25.9% from the same time one year ago.

The median price in the South was $270,000, a 15.0% increase from a year ago.

West
Existing-home sales were unchanged from last month, recording an annual rate of 1,400,000 in November, a 27.3% increase from a year ago. 

The median price in the West was $467,600, up 13.8% from November 2019.

First-time buyers were responsible for 32% of sales in November, equal to the percentage seen in both October 2020 and November 2019. Individual investors or second-home buyers, who account for many cash sales, purchased 14% of homes in November, identical to the share recorded in October 2020 and a small decline from 16% in October 2019. All-cash sales accounted for 20% of transactions in November, up from 19% in October but unchanged from November 2019.
Pending home sales fell slightly in October, according to the National Association of Realtors. Contract activity was mixed among the four major U.S. regions, with the only positive month-over-month growth happening in the South, although each region achieved year-over-year gains in pending home sales transactions. All regions experienced double-digit year-over-year increases.
NAR’s Pending Home Sales Index (PHSI), fell 1.1% to 128.9 in October, the second straight month of decline. Year-over-year, contract signings rose 20.2%. An index of 100 is equal to the level of contract activity in 2001. The Northeast PHSI slid 5.9% to 112.3 in October, an 18.5% increase from a year ago.
In the Midwest, the index fell 0.7% to 119.6 last month, up 19.6% from October 2019. Pending home sales in the South increased 0.1% to an index of 151.1 in October, up 21.0% from October 2019. The index in the West remained the same in October, at 116.8, which is up 20.8% from a year ago.
Housing Market Forecast 2021: Will The Boom Continue Next Year?
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.
Before the COVID-19 pandemic, Realtor.com’s national housing forecast 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.
Tight inventory coupled with rising mortgage rates would have lead to dropping sales. Buyers were expected to continue to move to affordability, benefiting smaller and mid-sized markets.
The housing market predictions were pointing out that all the housing indices would trend upward for the nation as a whole as well as in every state, including the top 100 metro areas. After the coronavirus pandemic came into being, the housing market forecast runs the gamut from optimistic to pessimistic. The pace of home sales relative to inventory reached a new record high in February, although hints of deceleration were beginning to surface.
The median existing-home price for all housing types in March was $280,600, up 8.0% from March 2019 ($259,700), as prices increased in every region. The median home price gains marked 97 straight months of year-over-year gains (nationally). In March, the unsold inventory was equal to a 3.4-month supply at the current sales pace, up from three months in February and down from the 3.8-month figure (from a year ago).
The fall in GDP associated with the coronavirus pandemic, and the rise in unemployment, is unprecedented. Despite that, there is little sign so far that the housing market is about to subside. Housing market predictions that take Covid-19 into account have already come out. Before the pandemic hit the nation the supply of new housing was failing to keep up with demand.
Social-distancing requirements are also likely to hold construction back in the coming months. With many sellers remaining on the sideline and a decline in housing starts, inventory will remain constricted. Under normal market conditions, prices would be expected to skyrocket as inventory declines at a faster rate, but buyer demand is expected to see-saw as the fourth wave of coronavirus pandemic pop-ups in winters.
Hence, home price growth will flatten, with a forecasted increase of just 1.1 percent. If the pandemic worsens further in the coming months, the sales are forecasted to take a hit as sellers might again de-list their properties and buyers would also stay away.
Capital Economics is estimating four million homes will be sold in 2020. This would be the lowest rate since 1991. For comparison, roughly 5.3 million homes sold in 2019. The trade war with China threatened international trade, creating a cloud that deferred business investment. Now we’re looking at a certain economic downturn due to the government’s choice to close the vast majority of businesses, nearly killing the service economy.
Experts think that 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. The number of homes for sale fell nearly 16 percent in March 2020, after listings fell 15 percent year over year in February. This was equal to roughly 200,000 homes being taken off the market.
People were reluctant or unable to show their homes, while others are afraid it won’t sell and thus didn’t list their homes at all. US housing market predictions for the longer term will depend on the lingering impact of this virus. How long will it take for the economy to return to normal? How quickly will the service economy re-open and get people back to work?
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. While housing demand has been softening nationwide due to the pandemic and job losses, 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. For the first time since the pandemic began, all four major components of real estate activity—the demand, supply, pricing, and sales—are growing above the pre-COVID pace.
However, we may see home sales temper toward the latter part of 2020 and into 2021 if the unemployment rate stays elevated, but slower home sales are different than a busted housing bubble.
Many experts were predicting that the pandemic could lead to a housing crash worse than the great depression. But that’s not the case. The good thing, at least for buyers and investors alike, is that house prices have nearly flattened and are poised to remain stable in the latter half of this year.
Let’s first look at one of the most talked-about negative housing forecasts for 2021 — The rising mortgage delinquencies and their impact on the housing market in 2021? MBA forecasts that the refinance boom will surge in March and then drop by 54% by the second quarter of 2021. 
Delinquencies at the end of 2019 were at their lowest level since 1979. That turned around quickly with the pandemic and spike in unemployment. It is important to note that foreclosure activity is increasing despite the various foreclosure moratoria that are in place. Mortgage delinquencies and foreclosures increased in August and October, respectively. 1.2% of loans are at least 150 days past due according to CoreLogic.
ATTOM reported that foreclosures increased by 20% in October. The increased long-term delinquency is due to participation in forbearance programs, and foreclosures are down 80% year-over-year. South Carolina, Nebraska, and Alabama post highest state foreclosure rates
According to RealtyTrac’s October 2020 U.S. Foreclosure Market Report, there were a total of 11,673 U.S. properties with foreclosure filings — default notices, scheduled auctions, or bank repossessions — in October 2020, up 20 percent from a month ago but down 79 percent from a year ago. South Carolina, Nebraska, and Alabama post the highest state foreclosure rates.
Big metropolitan statistical areas are having the highest foreclosure rates. Almost all of the metro areas where foreclosure activity increased on a month-over-month basis are also places where unemployment rates are higher than the national average, and in many cases have been hotspots of COVID-19 infections.
According to third-quarter 2020 research released by the Mortgage Bankers Association’s Research Institute for Housing America, over 6 million households did not make their rent or mortgage payments and 26 million individuals missed their student loan payment in September 2020.
During the third quarter, the percent of homeowners and renters behind on their payments decreased slightly from the second quarter, but the overall amount remains high. In September, 8.5% of renters (2.82 million households) missed, delayed, or made a reduced payment, while 7.1% (3.37 million homeowners) missed their mortgage payment.
Student debt borrowers rose from 3% at the beginning of April to 8% by the end of September. The millions of student debt borrowers behind on their payments also have future ramifications for the housing markets. In aggregate, rental property owners lost as much as $9.2 billion in third-quarter revenue from missed rent payments.
Why is there a negative housing market forecast for 2021 amidst the ongoing boom? At the moment, the foreclosure moratoriums have kept lenders from being able to even start their processing of defaults. One of the negative housing predictions is that the supply in the form of foreclosed homes may overwhelm the demand by many folds in 2021. The result would be that prices are going to plummet again and the real estate sector will likely cool off.
The major effect will be seen in the summer of 2021 because foreclosure that starts today is probably not going to be processed until mid of 2021. It will be well into 2021 before you will see a spike in single-family and condo foreclosures. First of all the mortgage forbearance must end. Then the backlog of prior foreclosure and eviction cases must be cleared before a wave of new ones can be processed.
This creates an incredible buying opportunity in the local housing markets if you can secure funding or have the cash to start buying once this inventory hits the market. According to Capital Economics, the US rental markets have been getting looser, and we can expect vacancy rates to rise further to 5.5% by the end of 2020.
That will push rental growth down to -1.5% year-over-year over the next couple of quarters. But, beyond that, the lack of homes for sale means rental demand should recover alongside the economy, and yields will ease back over 2021 and 2022.
However, we won’t speculate much about it and would rather focus on the current housing indicators and their recovery from the lows caused by the pandemic.
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. This increase in buyer activity can go on for the coming winter season as long as mortgage rates remain low and jobs continue to recover. But more importantly, if the coronavirus cases do not rise at a rapid pace.
However, as demand for home buying remains super strong, we’re still likely to end the year with more homes sold overall in 2020 than in 2019. Capital Economics’ recent housing market predictions are that new and existing home sales will fall back over the remainder of the year. After rising to 5.3% y/y in the third quarter, growth will slow to 2.0% y/y by the end of next year.
According to N.A.R,’s recent forecast, for all of 2020, existing-home sales are expected to increase by 1.1% compared to 2019, with sales ramping up to 5.4 million by the fourth quarter. According to their chief economist, Lawrence Yun, they are witnessing a true V-shaped sales recovery as homebuyers continue their strong return to the housing market.
For the year 2021, Yun projects existing-home sales to reach 5.86 million, supported by an economy that he expects to expand by 4% and a low-interest-rate environment, with a 30-year mortgage rate average of 3.2%. New home sales are expected to be higher this year than last, and annual existing-home sales are now projected to be up – even after missing the spring buying season due to the pandemic lockdown.
Realtor.com’s latest housing market forecast for 2021 shows that the housing boom will continue but the seasonal trends will normalize. 

Spring and summer home-buying seasons in 2021 will be strong.
The existing home sales will increase by 7 percent in the year 2021.
The rise of millennials will push the housing demand up. 
Home prices will hit new highs, even though the pace of growth slows.
There would be no double-digit price gains.
The home prices will appreciate by 5.7%.
Single-family housing starts are now predicted to increase by 9 percent.
Low mortgage rates will keep purchasing power healthy, but monthly mortgage costs will rise as mortgage rates steady and home prices continue to rise.
Mortgage rates will remain low with an average of 3.2% throughout the year.
Buyers seeking affordability and space will drive interest in the suburbs.
The pandemic has merely accelerated this previous trend by giving homebuyers additional reasons to move farther from downtown.
Sellers will get top dollar for their homes.
Fast sales will remain the norm in many parts of the country which will be a challenge felt particularly for first-time buyers

Housing Indicator
Realtor.com 2021 Forecast

Mortgage Rates
Average 3.2% throughout the year, 3.4% by end of year

Existing-Home Median Sales Price Appreciation
Up 5.7%

Existing-Home Sales
Up 7.0%

Single-Family Home Housing Starts
Up 9%

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 in large part to an expected slowdown in GDP growth, the fading impact of historically low mortgage rates, fewer sales occurring that were deferred from earlier this year, and historically low levels of for-sale inventory.
An expected reacceleration of GDP growth in 2021 should help push sales volumes higher.
The home price forecast has been adjusted to higher for 2021.
Seasonally adjusted home prices are expected to increase by 1.2% from August to November and rise 4.8% between August 2020 and August 2021.
The previous forecast predicted a 3.8% increase in home prices over this time frame.

Courtesy of Zillow.com
HOTTEST REAL ESTATE MARKETS IN AMERICA 2020
According to Realtor.com’s Market Hotness Index, measuring time-on-the-market data and listing views per property, the east coast accounts for seven of the top 10 zip codes, with a focus in the northeast region. Although these markets were hit by the COVID-19 pandemic first, they were also some of the first to recover, with caseloads easing over time.
The resulting pent up demand has driven homebuyers back to these markets, but now with an increasing preference for neighborhoods outside of the dense city centers and more toward suburban areas. Affordability continues to be a key factor in attracting buyers to these neighborhoods.
The median listing price in the hottest zip codes was $335,000, up 1.8 percent year-over-year. However, these prices were 15 percent cheaper than their surrounding metros, on average, and essentially right in line with the national median price of $331,000 during the same period.
The top 10 zip codes follow the overall trend of homebuyers shifting their buying behavior in response to the pandemic by increasing their search toward less dense suburbs beyond urban city centers.

The 2020 Hottest ZIP Codes in America by Realtor.com

Rank
Zip Code
Zip Name
Views Per Property Y/Y
Median Days on Market
Median Listing Price

1
80911
Colorado Springs, CO
38%
13
$287,000

2
43068
Reynoldsburg, OH
69%
17
$204,000

3
14617
Rochester, NY
44%
18
$162,000

4
2176
Melrose, MA
14%
19
$644,000

5
4106
South Portland, ME
5%
21
$377,000

6
66614
Topeka, KS
99%
19
$184,000

7
3051
Hudson, NH
45%
22
$350,000

8
1602
Worcester, MA
45%
21
$318,000

9
22152
Springfield, VA
41%
7
$553,000

10
27604
Raleigh, NC
81%
25

Before the coronavirus pandemic began, the U.S. housing market was already short from the supply side. Years of slow home-building activity coupled with the ongoing financial crisis point to the fact that the number of homes for sale would still fall well short of demand in the coming months.
Housing market experts predict that sharp declines in the prices look improbable as the buyer demand has remained relatively strong despite the pandemic. A lot of new buyers want to purchase a house and while investors have taken a pause.
The housing market 2020 was running at a record pace in the early stages of the coronavirus outbreak in February 2020, with sellers continuing to gain leverage, and buyers benefit from lower mortgage rates. We saw some of the best home sales and housing starts to pace in more than a decade until February 2020.
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. According to Freddie Mac, mortgage rates continue to slowly drift downward.
Record-low mortgage rates are likely to remain in place for the rest of the year, and all the Fed’s policymakers foresee no rate hike through 2022. You’ll likely start to see those long-term rates remain low and potentially slip a bit lower in tandem with short-term borrowing costs. That means refinancing could be a smart option for your pocketbook.
A reduction in even just a quarter of a percentage point could potentially shave off a couple of hundred dollars from your monthly payments. This will be the key factor driving housing demand as state economies steadily reopen.
We can expect a wave of mortgage refinances to save money. Fannie Mae predicts 40% more mortgage refinances in 2020 than in 2019. To help borrowers and renters who are at risk of losing their home due to the coronavirus national emergency, the Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac (the Enterprises) are extending their moratorium on foreclosures and evictions until at least until January 31, 2021—the current moratorium was supposed to expire at the end of December 31, 2020.
That gives potential home sellers hope, though it will take time for these low-interest rates to offset the spike in unemployment and general economic malaise. The foreclosure moratorium applies to Enterprise-backed, single-family mortgages only while the REO eviction moratorium applies to properties that are acquired by Fannie or Freddie through foreclosure or deed-in-lieu of foreclosure transactions.
The moratorium is expected to cost the two government-sponsored enterprises between $1.1 billion and $1.7 billion, and it protects more than 28 million homeowners across the country. This is in addition to the $6 billion in costs already incurred by the Enterprises. FHFA will continue to monitor the effect of coronavirus on the mortgage industry and update its policies as needed.
Current Economic Situation & Its Affect on Housing Market
The pandemic cost 22 million payroll jobs in March and April, and about 9 million have been recovered through July. But more recently, job openings appear to have stalled, and other statistics indicated that the labor market remains in the grips of recession. On August 27, the Labor Department said that the number of Americans applying for jobless benefits topped 1 million last week, just as it has most weeks since late March.
That’s about four times the number of average weekly applicants before the pandemic. And the near-term job prospects are dim for people in service industries such as restaurants, hotels, travel, and entertainment. According to the U.S. Bureau of Labor Statistics, as of July, the U.S. unemployment rate stood at 10.2 percent.
The rate is encouraging when compared to previous months but is still above the highest rate during the Great Recession—10 percent in October 2009. These improvements in the labor market reflected the continued resumption of economic activity that had been curtailed in March and April due to the coronavirus (COVID-19) pandemic.
At the same time, the stimulus package that Congress passed in March was more than double the financial aid offered during the last downturn.
Real gross domestic product (GDP) increased at an annual rate of 33.1 percent in the third quarter of 2020, as efforts continued to reopen businesses and resume activities that were postponed or restricted due to COVID-19, according to the “advance estimate” released by the Bureau of Economic Analysis. This is a massive economic recovery as in the second quarter of 2020, real GDP had decreased by 31.4 percent.
The decline in second-quarter GDP reflected the response to COVID-19, as “stay-at-home” orders issued in March and April were partially lifted in some areas of the country in May and June, and government pandemic assistance payments were distributed to households and businesses. This led to rapid shifts in inactivity, as businesses and schools continued remote work, and consumers and businesses canceled, restricted, or redirected their spending.
The third-quarter increase in real GDP reflected increases in consumer spending, inventory investment, exports, business investment, and housing investment that were partially offset by a decrease in government spending. Imports, a subtraction in the calculation of GDP, increased.
The increase in consumer spending reflected increases in services (led by health care) and goods (led by motor vehicles and parts). The increase in inventory investment reflected an increase in retail trade inventories (led by motor vehicle dealers). The decrease in government spending was in federal as well as state and local governments.
Current‑dollar GDP increased 38.0 percent, or $1.64 trillion, in the third quarter to a level of $21.16 trillion. In the second quarter, GDP decreased 32.8 percent, or $2.04 trillion (tables 1 and 3).
The price index for gross domestic purchases increased by 3.4 percent in the third quarter, in contrast to a decrease of 1.4 percent in the second quarter (table 4).
The PCE price index increased 3.7 percent, in contrast to a decrease of 1.6 percent. Excluding food and energy prices, the PCE price index increased by 3.5 percent, in contrast to a decrease of 0.8 percent.
Current-dollar personal income decreased $540.6 billion in the third quarter, in contrast to an increase of $1.45 trillion in the second quarter.
Disposable personal income decreased $636.7 billion, or 13.2 percent, in the third quarter, in contrast to an increase of $1.60 trillion, or 44.3 percent, in the second quarter.
Real disposable personal income decreased by 16.3 percent, in contrast to an increase of 46.6 percent.
Personal saving was $2.78 trillion in the third quarter, compared with $4.71 trillion in the second quarter.
The personal saving rate — Personal saving as a percentage of disposable personal income — was 15.8 percent in the third quarter, compared with 25.7 percent in the second quarter.
Courtesy of Bea.gov
The Federal Reserve says it will keep buying bonds to maintain low borrowing rates and support the U.S. economy during a recession. It intends to keep the interest rates at rock bottom for even longer than previously expected after a major policy shift that has profound implications for Wall Street, workers, and savers.
The economy is expected to shrink by 6.5% this year, in line with other forecasts, before expanding 5% in 2021. The Federal Reserve foresees the unemployment rate at 9.3%, near the peak of the last recession, by the end of this year. The rate is now 13.3%. The whole new policy aims to address the immediate economic problems caused by the pandemic-induced downturn.
But knowing that the Fed’s benchmark rate is likely to stay at its current level of near zero for a long time — analysts say that could be several years — might give companies more confidence to invest and hire.
Employers and households also could benefit from cheaper borrowing rates for houses, cars, and other loans. And over the long run, if an extended period of low-interest rates supports economic growth, that could lead to further drops in unemployment, which in turn could help disadvantaged workers who are typically the last to benefit from a long economic expansion.
Over the long term, the U.S. will probably face slower growth, a weaker dollar, and a huge debt related to paying for the crisis response.
What will 2021 be like for buyers? Economic activities are ramping up in all the sectors, mortgage rates trend at historic lows, and jobs are also recovering. Record low mortgage rates are providing opportunities for buyers to lock-in low monthly mortgage payments for future years. The latest housing market trends show that prices are rising in most parts of the country and most price segments because of the lack of supply.
Although growth in supply remains below the normal seasonal pace it continues to improve as buyers anxiously await more sellers to put fresh new homes for sale on the market. Tight housing inventory was the issue for buyers before Covid-19 as well. Due to this persistent shortage of housing, some experts predict that the median home price for the country as a whole could easily rise by 10% cumulatively over the next two years.
If you qualify for a mortgage, you have a more limited selection and prices close to what they were before the coronavirus hit, but you have relatively little competition. In response to the COVID-19 national emergency, borrowers with financial hardship due to the pandemic have been able to receive forbearance, which is a pause or reduction in their monthly mortgage payment. Borrowers can request an additional six months if needed. FHA does not require lump sum repayment at the end of the forbearance.
An important step in this direction was the announcement of the payment deferral option for borrowers. The Federal Housing Finance Agency (FHFA) announced on May 13 that Fannie Mae and Freddie Mac (the Enterprises) are making available a new payment deferral option. The payment deferral option allows borrowers, who can return to making their normal monthly mortgage payment, the ability to repay their missed payments at the time the home is sold, refinanced, or at maturity.
What will 2020 & 2021 be like for sellers? Expect homes to be slow to sell, and you may have to market them down to move them. Or you may need to wait a few months to see things shift from a buyer’s market to a balanced market. The only exception would be the “affordable” homes that are in short supply. In this case, you face a seller’s market as soon as people are allowed to go out shopping.
What will 2021 be like for investors? Many investors who primarily acquired at the courthouse foreclosure auction are migrating to buy bank-owned (REO) homes via online auction, which also provides the added benefit of safety from viral exposure. The added competition for these homes due to the moratorium on foreclosures could drive up the prices in the distressed housing market.
While for someone looking to buy a home and then immediately flip it seems a bit difficult because it’s not clear where real-estate prices will go. On the other hand, investors looking to buy a home and hold onto it in the long term, particularly as a rental property, won’t face as much risk. According to a recent survey from Auction.com, 64% of investors who primarily buy investment properties as rentals said they planned to increase or keep their acquisitions, despite the pandemic.
Even though the housing market likely won’t be the cause of the next recession, an economic downturn would still have an impact on the US real estate sector. The spillover to the housing market will rely upon the profundity, length, and severity of the 2020 recession and, if some parts of the country feel the effect worse than others, some local housing markets could see greater effects.
“The current economic expansion is getting long in the tooth by historical standards, and more late-cycle signs are emerging,” said Scott Anderson, chief economist at Bank of the West, who was among those predicting a 2020 recession.
According to a survey published by WSJ, some 59% of private-sector economists surveyed in recent days said the economic expansion that began in mid-2009 was most likely to end in 2020. An additional 22% selected 2021, and smaller camps predicted the next recession would arrive the following year, in 2022 or at some unspecified later date.
In a research report in which Zillow surveyed 100 real estate experts and economists about their predictions for the housing market, it disclosed that almost 50% of all survey respondents said the following recession will initiate in 2020, with the first quarter of the year referred to the most as to when the recession will start.
The main culprit for the housing recession: monetary policy. The experts predicted that monetary policy will be the deciding factor this time around. In particular, they argued that the Federal Reserve could prompt slower growth if it raises short-term interest rates too quickly.
To put it simply, the US housing market is ripe for investment in 2020, making it a great time to buy a rental property for sale to increase your cash flow. 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.
For everyone else, real estate is appreciating at or just above the rate of inflation. The home price appreciation rate has slowed so far but prices are still rising. While many economists predict that home prices will continue to rise, much will depend on the economy’s ability to bounce back from the pandemic.
Housing Affordability Overview 2020
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. To afford a typical mortgage payment, a given family needs to spend no more than 25% of income on its mortgage payment (for a 30-year fixed-rate mortgage with a 20% down payment).
Households spending more than 25% of the income on housing costs are likely to face financial burden or stress. Qualifying income is derived from the monthly payment on the median-priced existing home, at the effective mortgage interest rate.
Affordability was already a problem for the US housing market before the coronavirus hit. There was a shortage of affordable housing, driving up the cost of the homes Millennials can afford. This is important since half of all home mortgages are given to Millennials. And they are forced to compete for new housing stock since Boomers and Generation Xers tend to hold onto their homes. The housing affordability index determines the affordability of the housing market by comparing the median household income to the median home price.
The national housing affordability index was 170.0 for February 2020. That was a nearly one percent increase from the prior month and an eight percent increase from a year before. An affordability index of 100 would mean that the average person could afford the average home. An increasing affordability index means more people are priced out of the housing market. The economic fallout of the coronavirus is probably going to make housing less affordable, not more so. The official unemployment rate jumping ten percentage points or more means many people are out of work.
In June, employment in leisure and hospitality rose sharply. Notable job gains also occurred in retail trade, education and health services, other services, manufacturing, and professional and business services. All of this adds up to tens of millions of households seeing their income drop, many of them substantially. And home prices will remain steady or drop just a few percentage points. The result is a dramatic drop in the average household income while the housing portion of this equation is almost unchanged. We could easily see the housing affordability index hit 200.
This is one of the more certain housing market predictions. Another factor affecting this equation is the rising average price of new homes. Homebuilders were already prioritizing luxury homes over affordable and/or starter homes. This is why the median home price was rising in 2019. We can expect home builders to focus their limited manpower and resources on luxury homes that will sell for more. And that will worsen the housing affordability index as long as the economic crisis continues.
However, the housing market forecast should not affect your decision to buy a home. Instead, you should make the decision to buy a home based on your economic situation. Pessimistic housing market predictions may scare some from listing their home, but many motivated sellers will list their property. That may contribute to a decline in sale prices, but it presents an excellent buying opportunity.
An April Realtor.com survey found out that after spending many long weeks confined in their homes, consumers’ preferences shifted toward bigger homes and more outdoor space for their next homes. The share of home buyers looking at suburban markets near large cities and even across state lines is showing a rebound, as consumers look to a post-pandemic landscape, with cities in the Southeast seeing renewed interest.
What Makes Housing Affordable?
Lower mortgage costs and median income rises are the two important factors that make housing relatively more affordable. In 2020, historically low mortgage rates are certainly making home purchases more affordable. People still want to own homes, and with mortgage rates low, a lot of people are taking advantage of that even though there is an apparent economic slump.
The homeownership rate reached 67.9% in the second quarter of 2020, according to a recent report from the U.S. Census Bureau. That’s up from 65.3% of Americans owning their residences in the first quarter of the year and 64.1% in the second quarter of last year. The homeownership rate of 67.9 percent was 3.8 percentage points higher than the rate in the second quarter of 2019 (64.1 percent) and 2.6 percentage points higher than the rate in the first quarter of 2020 (65.3 percent).
The 30-year fixed-rate averaged 3.57% in the first quarter of 2020, down from 4.62% one year ago. The average monthly mortgage payment on a 30-year fixed-rate mortgage with a 20% down payment was $995, down from $1,048 a year ago. The current 30-year fixed-rate is averaged 3.15%. When refinancing a $200,000 outstanding loan balance into a 30-year fixed-rate mortgage, at the recent 50-year low average mortgage rate of 3.15%, your monthly mortgage payment would now be $859.
The national median family income for the United States for FY 2020 is $78,500, an increase of almost four percent over the national median family income in FY 2019, according to the U. S. Department of Housing and Urban Development. This ($859 mortgage payment) is about 13% of the median family income of $78,500, down from about 16% one year ago.
Courtesy of Freddiemac.com
To afford a typical mortgage payment, a given family needs to spend no more than 25% of income on its mortgage payment (for a 30-year fixed-rate mortgage with a 20% down payment). The income that is needed for this scenario decreased to $47,760, down from $50,304 one year ago.
The national median sales price of existing single-family homes was up 4.2 percent in Q2 2020 to $291,300 and up 5.9 percent to $280,200 based on the Trailing Twelve Month (TTM) average of quarterly median prices according to the National of Association of Realtors® (NAR).
For the US, at the 5% down-payment threshold, the qualifying income amount for the second quarter of 2020 was $58,613. At the 10% down-payment mark, the qualifying income was $55,528 and with a 20% down-payment, the income required to qualify for a mortgage was $49,358. The West led all regions with the highest qualifying income while the Midwest had the lowest income for 5%, 10%, and 20% down payments on a single-family home.
A household is said to be cost-burdened when it pays more than 30 percent of its income toward housing expenses. As a more extreme measure, a household is said to be severely cost-burdened when it pays at least 50 percent of its income toward housing expenses. With today’s mortgage rates at historic lows, you can refinance your mortgage to lower your monthly payments and improve your financial situation.
With rates at or near historic lows, refinancing could help you save by reducing your monthly payments and reducing the total amount of interest that you pay over the life of the loan. Also, the mortgage rates continue to slowly drift downward with a distinct possibility that the average 30-year fixed-rate mortgage could remain below 3 percent in 2021 as well.

References:
Latest Housing Market Statistics

June 2020 Monthly Housing Market Trends Report: Lack of Inventory Continues to be Buyers’ Biggest Hurdle in June

May 2020 Monthly Housing Market Trends Report: Key Housing Indicators Begin to Turn Around in May

https://www.nar.realtor/research-and-statistics/housing-statistics/

2020 Housing Market Predictions – COVID-19 Update

https://www.marketwatch.com/story/fannie-mae-home-sales-will-decline-by-nearly-15-in-2020-due-to-coronavirus-2020-04-15
https://www.cnbc.com/2020/03/19/coronavirus-update-home-sales-could-fall-by-35percent-as-spring-market-stalls.html
https://www.cnbc.com/2020/04/15/coronavirus-homebuilder-confidence-takes-biggest-one-month-dive-in-history.html?recirc=taboolainternal
Current avg. home prices and forecast
https://www.zillow.com/home-values/

2020 Housing Market Predictions – Realtor.com

Housing construction, demand, and supply
https://www.statista.com/statistics/226144/us-existing-home-sales/

The U.S. is relaxing rules for medical professionals working across state lines

https://www.enterprisebank.com/insights/construction-industry-suppliers-pace-covid19-impact
https://www.constructiondive.com/news/6-ways-the-coronavirus-outbreak-will-affect-construction/574042/
Affordability index (nationally) – Median household income vs median home price
https://www.investopedia.com/terms/a/affordability-index.asp
https://ycharts.com/indicators/reports/monthly_housing_affordability_index
https://www.nar.realtor/newsroom/metro-home-prices-rise-in-96-of-metro-areas-in-first-quarter-of-2020
Factors affecting the 2020 housing market
https://www.curbed.com/2018/12/17/18144657/construction-homebuilding-housing-costs-renovation-labor
Where Is the Housing Market Headed In 2020
https://www.investopedia.com/investing/next-housing-recession-2020-predicts-zillow/ 
https://www.forbes.com/sites/alyyale/2019/07/08/housing-market-check-in-6-expert-predictions-for-the-second-half-of-2019/#2e97885a18ba
2020 and Beyond Forecast
https://www.daveramsey.com/blog/real-estate-trends
https://www.investopedia.com/personal-finance/how-millennials-are-changing-housing-market
2020 Economic Outlook
https://www.bea.gov/data/gdp/gross-domestic-product
https://www.businessinsider.com/us-housing-market-sudden-lack-of-consumer-interest-coronavirus
https://www.washingtonpost.com/business/2020/04/16/unemployment-claims-coronavirus/
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