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December 27, 2020November 23, 2021

Home Sale Predictions 2021

Given the performance of the housing market this year, can we make home sale predictions for next year? The housing market had quite a year! It’s amazing how resilient the market is, which demonstrates the appeal of homeownership. Even after a significant spring slowdown, home sales rebounded to record levels in the fall. NAR’s Existing Home Sales and Pending Home Sale Indices for October 2020 increased year-over-year 26.6 and 20 percent respectively (nar.realtor). Even as we headed toward the holidays, NAR’s November Existing Home Sales increased 25.8 percent year-over-year. And year-over-year median home prices increased 14.6 percent.

While some experts expect the recent housing market activity to continue, others question if this intense home buying is sustainable. Making home sale predictions for the new year has always been predicated on recent trends. However, 2020 was different. Unexpected and unusual events occurred throughout the year affecting the housing market. First taking a pause because of an economic shock, home sales made up ground later in the year.

Recent trends suggest that home buying will continue at a healthy rate, as long as the economy remains relatively similar. However, being an election year there is anticipation for change. Even many economists, who are typically ready to offer their opinion, are ambivalent about the economy. This may suggest that the economic outlook for the near future is uncertain.

A main factor to watch in 2021, is employment. It’s a known fact that unemployment directly effects home sales. In periods of increasing unemployment, home sales decline. A 2010 Florida Realtors (floridayrealtors.org) survey demonstrated a correlation between unemployment and foreclosures. There is no coincidence that home sales strongly rebounded along with employment and the economy. If employment remains stable into 2021, home sales will continue to over-perform.

Other factors that will drive the housing market in 2021 include mortgage interest rates, home sale inventory, and home buyer demand.

Mortgage rates have been relatively low since 2008. At that time, rates hovered in the low 4’s, and were though to be “historically low.” Also, consider that mortgage rates were in the 18 percent range during the early 1980’s. Even during the go-go market of 2005-2006, rates hovered in the 6 percent range. But the most recent mortgage interest rate average of 2.66 percent for a 30-year-fixed rate is described as “another record low” by Freddie Mac’s December 24^th 2020 Primary Mortgage Market Survey (freddiemac.com). If mortgage rates remain low, home buyers will be incentivized to buy homes.

Another after-effect of the Great Recession, which continues today, is low home sale inventory. The Great Recession changed how consumers thought of housing. Since 2008, home owners have remained in their homes much longer. Many growing families make due with smaller spaces, rather than moving-up to a larger home. Many older home owners are deciding to “age in place,” in lieu of down-sizing. And telecommuting is outpacing job relocation. Home sale inventory of non-distressed properties will continue to remain low through 2021.

There is always “home buyer demand.” Meaning there are always active home buyers. However, the strength of the demand varies. Home buyer demand is typically gauged in hindsight through home sales and pending home sales. When you combine housing stats with other factors, such as employment, economy, and mortgage rates you can estimate the strength of future home buyer demand. If economic factors remain stable, home buyer demand will continue to be strong in 2021.

Original published at https://dankrell.com/blog/2020/12/27/home-sale-predictions-2021/

By Dan Krell
Copyright © 2020

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

November 15, 2013July 4, 2019

Is there a best way to predict the housing market

Various studies demonstrate that you can assess and somewhat predict activity in a housing market; which, albeit in hindsight, can assist home sellers and buyers in determining whether it is a good time to sell or buy a home. For example, I recently wrote about gauging real estate through divorce and premarital agreements; which discussed the implications of these life events to the housing market. The increase in prenups could indicate an increased perception in the value of home ownership and possibly the overall housing market.

Another recent study indicated that it may be possible to determine home pricing through internet search data. Beracha and Wintoki (Forecasting Residential Real Estate Price Changes from Online Search Activity; The Journal of Real Estate Research 35.3 (2013): 283-312.) set out to find out if keyword search engine data from Google could determine price shifts in various cities. They concluded that this may be the first study that directly links “aggregated” search engine data to “abnormal crosssectional home price changes.”

Essentially, the research established that you can figure out metro housing market activity through Google Trends and Google Insights, which provide keyword volume measurement in internet searches. The study examined the keywords “real estate [city]” from 2004 through 2011, and concluded that “…cities associated with abnormally high real estate search intensity consistently outperform cities with abnormally low real estate search volume by as much as 8.5% over a two-year period.”

And although the study’s authors discussed prior research linking internet keyword searches and consumer behavior, they caution that there are a number of keywords related to real estate that may be more relevant than the keywords used in their study. Regardless, the authors assume that their results may be useful in home sales and purchases. More importantly, it may seem as if their results may strengthen the link between specific search engine keywords (e.g, “real estate Rockville” or “real estate Bethesda”) and the ability to predict a housing bubble, or possibly home price peaks.

Generalized, “global” data, such as those described in Beracha and Wintoki’s study, and their meaning may be interesting; however, limiting yourself to such indiscriminate analysis for your home sale or purchase could be disadvantageous. Global data does not distinguish the many factors that impact regional markets; nor can it sort out differences within a local market (neighborhood data within a region can vary significantly).

Using “global” tools may be useful; however, if you are planning a home sale or purchase – seek out the assistance of a local Realtor®. Your real estate agent has access to local specific data that is reported through the MLS. Using MLS data, your agent can prepare a market analysis that compares your home to recent neighborhood sales; the breakdown can put your home in perspective and can give you a price range to assist you in listing or purchasing the home. Additionally, your agent can provide a hyper-local trend analysis so as to help you understand what to expect from the local housing market.

by Dan Krell © 2013

December 16, 2010July 8, 2019

Optimistic about housing in 2011

Would you have ever imagined that home prices could depreciate one third since the market peak? 33.5% is the overall decrease of the Standard and Poor’s/Case-Shiller Home Price Index 10 city composite from June/July 2006 through April 2009. If the index is expanded to the 20 city composite the decrease is only 32.6%; the peak to date decrease (through September 2010) is just under 29% (standardandpoors.com).

Although the latest index indicates another decrease in home prices, the Washington, DC metropolitan area was one of two metro areas that had a slight increase (the other metro area was Las Vegas, NV). DC metro area home prices increased 0.3% in the third quarter of 2010, preceded by a 0.2% increase during the second quarter.

Similarly, the Federal Housing Finance Agency’s seasonally adjusted House Price Index (HPI) also indicated an overall drop in home prices (a 3.2% decrease from Q3 2009 to Q3 2010). However, Washington, DC is one of ten cities that experienced price increases over the past four quarters (FHFA.gov).

If you haven’t yet become indifferent, some industry experts are expressing optimism for 2011 – for a change of pace.

Fannie Mae Vice President and Chief Economist, Doug Duncan, expressed cautioned optimism in Fannie Mae’s November Economic Outlook podcast (fanniemae.com). Dr. Duncan expects slight improvements in home sales and other economic factors in 2011. These slight improvements, along with expected low mortgage rates through 2011 will assist a slight recovery.

Freddie Mac Chief Economist Frank Nothaft shared some optimism in his December 6th commentary in the Freddie Mac’s “Executive Perspectives Blog, Insights on Housing Finance” (freddiemac.com). Dr. Nothaft expects that foreclosure inventories will continue to affect local markets and home prices. However, home affordability (which is at the lowest point in years) combined with low mortgage rates should give the housing market a boost in the second half of the year.

The National Association of Realtor’s Chief Economist, Lawrence Yun, expects that the biggest push for the housing market will be through the extension of the Bush tax cuts. In a November 16th NAR press release, Dr. Yun explains that the recovery of the housing market depends on jobs. He expects about 1.5 million jobs to be created if the Bush tax cuts are extended for those earning up to $250,000, and an additional 400,000 jobs to be created “if the Bush tax cuts are extended for everyone” (Realtor.org).

Of course, many factors can influence our presently impressionable economy. For example, recent Congressional testimony by two Governors of the Federal Reserve Board (Elizabeth Duke on November 18th and Daniel Tarullo on December 1st) discussed the impact of foreclosures going into 2011 (federalreserve.gov). Governor Tarullo concluded his testimony to the Committee on Banking, Housing, and Urban Affairs by stating, “…I regret to say that the hangover from the housing bubble of this past decade is still very much with us…”

The bottom line is that although most expect foreclosure inventories to continue to drag home prices, there is optimism – for the second half of 2011. As job numbers begin to improve, employment will be the big news. A slightly better employment picture combined with low mortgage interest rates and the most affordable housing market in decades will provide the spark that the housing market and economy have been seeking for over two years.

By Dan Krell
Copyright © 2010

Comments are welcome. This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws.