REALTOR®: NAR Chief Economist Says Real Estate a Great Hedge Against Inflation
The outlook for the residential real estate market continues to be promising, but the market will likely transition to more normal conditions in 2022, according to Dr. Lawrence Yun. The National Association of REALTORS® Chief Economist delivered the nationwide housing assessment last month at the NAR 2021 REALTORS® Conference & Expo in San Diego.
“The housing market has been the silver lining in this challenging Covid market,” said Yun. “All markets are seeing strong conditions and home sales are the best they have been in 15 years. The housing sector’s success will continue, but I don’t expect next year’s performance to exceed this year’s.”
An unknown, Yun said, is how remote work opportunities will play out in the future. The work-fromhome model has taken off among employees, giving them the flexibility to work from anywhere.
“We are only in the first inning of work-from-home options. People have not fully digested the work-from-home-flexibility model yet in determining home size and location choice,” said Yun.
Yun forecasts home sales will outdo pre-pandemic levels. He anticipates more inventory in the coming months as new housing construction is already underway. With the conclusion of the mortgage forbearance program, mortgage delinquencies will cause a number of homeowners to sell, but the number of foreclosures will be unlike that of the Great Recession and those houses will not stay long in the market.
Some areas in the nation are thriving and are already fully recovered. Idaho and Utah are two states that have reported currently having more jobs now than at the beginning of the pandemic.
Yun projected mortgage rates, which are currently at 3 percent, will likely see an increase of 3.7 percent by this time next year, a rise he attributes to persistent high inflation. Home prices rose by 12 percent on average in 2020 and 2021, while inflation rose 3 percent.
“Housing prices have outpaced people’s income. The price-to-income ratio is at alarming levels,” said Yun. He predicts the housing sector will settle down, but prices will hold on and be at above pre-pandemic levels because rents are rising.
“Rising rents will continue to place upward pressures on inflation,” said Yun. “Nevertheless, real estate is a great hedge against inflation.”
This year’s event was offered to NAR’s 1.5 million members in a hybrid platform. Representing the Silicon Valley Association of REALTORS® in San Diego were President Joanne Fraser, NAR Directors Jim Hamilton and Denise Welsh, and Executive Officer Paul Cardus.