Experts predict post-pandemic rebound, continued job growth, stable interest rates in 2021

Expect the post-pandemic economic rebound, improving job conditions and stable interest rates to continue in 2021. This is the consensus of more than 20 top U.S. economic and housing experts, shared by National Association of Realtors chief economist and senior vice president of research Lawrence Yun at the national Realtor group’s Second Annual Real Estate Forecast Summit held in December.

Yun said when the pandemic began there was a tremendous amount of uncertainty. After the longest economic expansion, 10 years of job creation, all 20 million jobs were wiped out in a single month.

“To our surprise, the housing market not only recovered but and then some, roaring past the prepandemic activity levels,” said Yun.

NAR expects home sales will reach 5.52 million in 2020, the highest annual mark since 2006. The median home price is forecast to set a record high of $293,000.

Yun said one reason for the housing recovery is the wealth in the housing market contributed a sizeable financial comfort for homeowners. Unlike the Great Recession, many homeowners today have good standing loans and much equity in their homes. Investors also have done well in the stock market.

A constraining factor is the lack of inventory, which is the reason why prices are rising. Prices are in no danger of decreasing. “We just want them to moderate,” said Yun.

If home prices continue to outpace income growth, affordability challenges will become more severe, particularly in high-cost states. Yun said homebuilding, while showing promise with strong demand, cannot fulfill shortages as the industry itself is experiencing the challenges of lack of skilled workers and rising prices of lumber and other building materials.

NAR sees 10 markets performing exceptionally well throughout the pandemic and expects them to perform well in a POST-COVID-19 environment in the next two years, based on their unemployment rate, net domestic migration, share of workers in retail trade, leisure and hospitality industries, mobility to retail and leisure places, and the fraction of the workforce working from home, among others. These markets are Atlanta-Sandy Springs-alpharetta, Georgia; Boise City, Idaho; Charleston-north Charleston, South Carolina; Dallas-fort Worth-Arlington, Texas; Des Moines-west Des Moines,

Iowa; Indianapolis-carmel-anderson, Indiana; Madison, Wisconsin; Phoenix-mesa-chandler, Arizona; Provo-orem, Utah; and Spokane-spokane Valley, washington.

“They’ll likely carry that momentum well into 2021 and beyond because of strong in-migration of new residents, faster local job market recoveries, environments conducive to work-from-home arrangements, and other factors,” said Yun.

Areas that are already attractive destinations, especially among movers from more expensive West Coast cities, include the Phoenix metro area, with Dallas ranking second. Atlanta had the highest share of workers working from home at 8.8 percent, compared to the national share of 5.6 percent.

The consensus among the economists is while there has been a small uptick in inflation, it is not a concern. The experts predict a Gross Domestic Product growth of 3.5 percent in 2021 and 3 percent in 2022; an annual unemployment rate of 6.2 percent next year with a decline to 5 percent in 2022; average annual 30-year fixed mortgage rates of 3 percent and

3.25 percent for 2021 and 2022, respectively; annual median home prices to increase by 8 percent in 2021 and by 5.5 percent in 2022; housing starts of 1.50 million next year and 1.59 million in 2022; and small declines in office and hotel vacancy rates in 2021, with a slight increase in retail vacancies next year.

The experts do not see the work-from-home trend to be permanent. They expect the share of employees working from home to be 18 percent in 2021 – down from 21 percent in 2020, and 12 percent in 2022.