Housing market will stay strong
Danielle Hale, chief economist for Realtor.com, discusses the outlook for the housing market.
Q: In 2020, tight inventories drove up the price of homes. Will that continue in 2021?
A Yes. There have been more buyers than homes for sale for the past five to 10 years, so it’s not a new phenomenon. We won’t see the double-digit price growth we saw in 2020, but we do expect prices to rise because we anticipate that inventories will continue to be relatively low.
Our forecast is for the median home sales price to rise by 5% to 6%, and for the overall number of homes for sale to continue to decline.
However, the rate of decline should slow, and we may even have an increase by the end of the year as we see more sellers than in 2020. The housing market in 2021 will look a lot more normal than in 2020.
Q: What about demand? Will it remain as strong in 2021 as it was in 2020?
A: I think we’ll see normal levels of demand in 2021. There will be some boost from buyers trying to take advantage of low mortgage rates, but we won’t have as much of that “make-up” buying from people who missed out in spring 2020 during lockdowns.
Q: The housing market was strong in 2020 despite high unemployment and an economic downturn. What drove the market?
A: The housing market kind of followed the economic trajectory. The economy was doing reasonably well in January and February. Then, in March, as we started to see cases of coronavirus really start to spread and economic activity fall off a cliff, we saw a big pullback in the housing market. But while the economy only started crawling back, the housing market was pretty quick to bounce back.
Q: Do you expect the trend of people moving away from urban core areas and into the suburbs to continue in 2021?
A: I do expect that to continue because
people are looking for affordability and they’re also looking for more space. The trend of buyers looking to the suburbs was happening even before the pandemic, and the pandemic kind of put it into hyperdrive. I think we’ll continue to see people moving to the suburbs but at a more normal pace.
Q: How has the pandemic affected the process of buying and selling a home?
A: The industry has done a remarkable job of doing business in a socially distant way. We’ve seen an increase in listings that have virtual tours, and agents have started doing livestreamed open houses. But a home is, for most people, the largest purchase they’ll ever make.
So although the transaction has become more virtual, people still want to see a home in person at some point — if not before they make an offer, then certainly after they make one.