Two new housing industry forecasts are predicting continued increases in home sales and prices throughout 2021.
In the report “What to Expect in Housing and the Economy in 2021,” LendingTree VP and Chief Economist Tendayi Kapfidze forecasted mortgage interest rates would rise between 10 to 30 basis points, averaging near 3%, with home sales rising between 10% and 15% and home prices marking upward acceleration at rates between 4% and 7%.
Kapfidze also anticipated the longstanding problems regarding inventory shortages to abate, with housing starts rising as much as 15% to 20% by the end of the year.
“Lack of supply has been a major contributor to higher home prices in 2020,” he stated. “As construction work bounces back in 2021, the supply of new homes should increase as more homes are built. However, most new supply will be at higher price points, which builders find more profitable.”
Kapfidze acknowledged that several Biden administration proposals, including a potential $15,000 tax credit to help buyers with down payments and the forgiving of student loan debt, could incentivize increased home sales. But he also warned that several wild cards, including the tightening of mortgage lending requirements and the end of foreclosure and eviction moratoriums, as being among the potential disruptive elements that could occur.
“The economy could remain weak even as it recovers through the year,” Kapfidze said. “If this happens, then labor market recovery will be tepid and income growth will be low. Beyond that, job losses in higher-income fields might become more prevalent, meaning fewer households will have money to put into the housing market.”
Separately, Mynd Management, an Oakland, California-based property management and real estate investment company serving the single-family rental housing market, announced its ranking for the best housing markets for sellers in 2021. The ranking number-crunched year-over-year home price appreciation trends from 2019 to 2020 in hundreds of metro areas, and this year the company predicted the best housing markets for property owners seeking appreciation are Milwaukee (which recorded a 17.9% appreciation rate), Memphis (16.6%), Detroit (15.4%), Columbus, Ohio (13.8%), and Phoenix (13.6%).
“While 2020 was an incredibly challenging year for many industries, the real estate sector remained resilient,” said Don Ganguly, SVP of Mynd Investor Services. “Historically low-interest rates, a shortage of new housing inventory and limited new construction have contributed to rising home prices nationwide.”
Ganguly noted that the pandemic-fueled trend of remote work enabled out-of-state relocation by many Americans, and he believed this trend will continue into 2021.
“The coronavirus has prompted families and businesses alike to leave high-priced cities like San Francisco, New York, and Los Angeles,” he added. “As a result, they’re acquiring properties in more affordable locations, such as the ones in our study.”