“A super hot market': Economists weigh in on what to expect in 2021”
Inman
The housing market will enter 2021 blazing hot with off-the-charts demand and an extreme shortage of homes for sale. While the risk of a double-dip recession hovers in the background, home sales and prices are expected to keep rising next year as coronavirus vaccines become available, the economy starts buzzing again and a new president focused on housing takes the helm. Inventory will continue to rule.
That’s according to several economists Inman reached out to for their predictions on how the housing market would fare in 2021. They weighed in on home sales and prices, inventory, the impact of a coronavirus vaccine, the incoming Biden presidency and the risk of another recession.
On home prices and sales
“We’re going to start the year in a super hot market,” said Mike Simonsen, CEO of housing market analytics firm Altos Research, in a webinar last week called “The Real Estate Market Outlook for 2021.”
Inventory has plunged to just under 469,000 single-family homes this month, down some 40 percent compared to the same time last year, according to Altos’ data.
While about 31 percent of listings have gotten price reductions at the end of the year in previous years, current price reductions only stand at 26 percent, according Simonsen. “That’s because demand has been off the charts,” he said. “[For] houses on the market now, if they take a price cut, that means the demands is a little weaker, and the price that it’s going to sell at in January or February, it’s going to be lower.
Win more double-sided deals in 2021
With Knock, agents automatically get both the buy-side and the sell-side of their clients’ deals, ...
He added that prices are “going to keep falling now through February, as the fresh new inventory comes on, and then we’ll probably have a resumption of a more normal market in the second quarter of 2021.”
Danielle Hale, chief economist at realtor.com, expects home sales to continue growing, jumping 7 percent in 2021, and prices to continue rising to new highs, though at a slower pace than in 2020, increasing 5.7 percent.
“As far as seasonality goes, we expect housing to be busier in spring, like it normally is, and while fall will be strong, we don’t expect it to match 2020’s frenzied level of activity,” she told Inman via email.
Daryl Fairweather, chief economist for Redfin, also predicted a strong year for home sales in 2021, even stronger than 2020 has been. She anticipates low double-digit home sale growth, close to 10 percent.
“There a lot of people who may have wanted to move this year but were just too nervous,” she told Inman in a phone interview. “They didn’t want to lose their homes during a pandemic or they didn’t want to list during uncertain economic times. It seems like next year the economy will be in a better place than it was this year.
“With the vaccine on the horizon we may even be able to open the economy, so that will lead to a lot more economic confidence among homebuyers and more people will just be willing to enter into homeownership with the recovery, though we’ll probably also see slightly higher interest rates. Interest rates have been at record lows this year, and they will probably take off a bit in 2021. That will make homebuying slightly less affordable, so we may see slower price growth in homes, just because of higher interest rates.”
Fairweather said she thinks more people will move across the country next year as remote work becomes more normalized.
“They’re going to seek out places that are more affordable where they can have more space, and they’ll choose to live in places that meet their own personal preferences instead of just living where they can find a job,” she said.
She expects home prices to rise the most in the most affordable places in the country. “We’ve seen a lot of migration to places like Austin...
