2021 Housing Market: Market Trends Forecast

Unlike so many businesses that have been grossly impacted by last year’s pandemic, the US housing market is flourishing, and it continues to play one of the most important supporting roles in the country’s economic recovery. We have seen a steady gradual comeback as the economy reopens to our new post-pandemic norm.

With the current job landscape and mortgage rates continuing to drive confidence for first-time home buyers and existing-home, sales are higher than they’ve been in the last fifteen years. Significantly enough, this has been followed by strong pending sales, purchase mortgage applications, and construction data.

Before we get too far ahead of ourselves though, let’s take a step back and look at the big picture here by starting with the U.S. economy.

The U.S. Economy

It’s been anticipated that the economy will grow up to 6.8% in 2021, from the prior 6.6%, on a fourth quarter-over-fourth quarter basis, as the latest predictions from Fannie Mae's Economic and Strategic Research (ESR) Group reports. Growth has been supported by diminishing COVID-19-related restrictions with the progression of vaccination efforts, along with the added support from the latest stimulus bill.

Although some uncertainty remains over the pace and duration of the current leg of the recovery, economists continue to anticipate an energetic acceleration in the near term, with growth in the second quarter expected at 9.1% annualized.

With the economy on the rise and a more confident working class, Americans are looking into the activity of the current housing market.

Housing Activity

It’s expected to remain strong in 2021. Keep in mind, while the ESR Group anticipates home sales to be on the rise (up to 6.2%) this year, the monthly pace is likely to steady
itself for what remains of 2021.

Low interest rates are also an inducement to buy homes, but slow supply growth continues to result in high levels of home price appreciation, offsetting some of the affordability benefits of the lower rate environment.

So, what remains consistent here? There's a strong demand and limited supply. The price of homes continues to appreciate and is predicted to be 8.0% in 2021 from the previous 4.2%.

As I am sure many of you are wondering by now, “Can we expect these low-interest rates to continue throughout the year?” A fair question to ask and one that the Federal Reserve has provided us with an answer.

Will Low-Interest Rates Stay Low?

As the Federal Reserve has made clear, there is no intention of raising interest rates any time soon. Many households are seizing this opportunity to refinance their existing mortgages but, additional uncertainty surrounds the timing and implications of the end of the forbearance policies.

These policies provide a temporary pause in mortgage payments to provide relief for those who might be struggling financially for any reason.

This leaves two BIG questions on everyone’s mind to consider.

  • “How will those policies impact the number and nature of home sales? 
  • What are foreclosures going to look like once the foreclosure moratoria and forbearance programs come to end?

Well, the significant difference this time around is homeowner equity.

Homeowner Equity

It has been recorded at an all-time high. Over $6.5 trillion! According to RealtyTrac’s parent company ATTOM Data, about 70% of homeowners have more than 20% equity. The continued improvement in the labor market and the higher levels of home equity will likely help limit distressed sales this year.

So, what does this mean exactly? Well, the record level of homeowner equity means that as foreclosure moratoria eventually expire, the overwhelming majority of distressed assets are likely to be sold well before the foreclosure auction.

Various consumer surveys have already responded in the first quarter of this year supporting this insight.

HPSI Survey Says...

The Fannie Mae Home Purchase Sentiment Index® (HPSI) is a quality indicator of the housing recovery and buyer/seller behavior. This index measures housing attitudes, intentions, and perceptions, using six questions from the National Housing Survey (NHS). The HPSI increased in March 2021 by 5.2 points to 81.7. Each year the HPSI is up 0.9 points.

Four of the HPSI’s six components increased month over month, including the
components related to home buying and home-selling conditions, household income, and home prices. The mortgage rate outlook component experienced only a decline, and the latest results indicate that only 6% of consumers believe that mortgage rates will decrease over the next 12 months.

With this data and the way mortgage rates are going, it would seem there is no better time to sell than now. 

A Great Time to Sell

Home-selling sentiment has experienced plenty of positive momentum across most consumer segments. It’s almost reached pre-pandemic levels and is generally a good indicator of a strong seller’s market.

On the other hand, while the net “good time to buy” component increased every month, it is still difficult for buyers due to the high prices and a lack of supply. Keep in mind, it is still below pre-pandemic levels.

The Federal Reserve Bank of New York's Center for Microeconomic Data released the March 2021 Survey of Consumer Expectations, which shows a continuation in the recent upward trend in inflation, home price, and spending growth expectations. Ultimately, households were more positive about their current and expected financial situation and their ability to access credit. This leads me to my next point...


The median year-ahead home price change expectations have increased 0.8
percentage points to 4.8% since March this year, a new series high. Keep in mind, this increase was driven mostly by respondents who live in the “West” and “Midwest” Census regions. 

Median inflation expectations at the one-year and three-year horizons both increased 0.1 percentage point in March to 3.2% and 3.1%, respectfully. Inflation expectations at both horizons have increased regularly over the past five months and they are now at their highest since mid-2014.

Along with the inflation of housing prices, we must consider another recent inflation in this past year. The unemployment rate and our current labor market.

The Labor Market

The U.S. unemployment rate decreased from 39.1% in February to 34.4% in March. This being the lowest level it has reached since the start of the pandemic. The mean perceived probability of losing one's job in the next 12 months decreased from 14.2% in February to 12.8% in March, the lowest reading in nearly three years. The median expected growth in household income increased by 0.4 percentage point to 2.8% in March, the highest level since January of last year.

Zillow's forecast predicts annual home value growth will rise as high as 13.5% by the summer of 2021, and for home values to end 2021 up 10.5% from their current levels. For now, there are no indications that price growth is going to slow down.

According to Zillow's market pulse report dated April 16, 2021, housing market
sentiment improved in March. While demand for housing remains red hot, supply-side constraints that have hindered homebuilders for years have recently become even more acute. Home construction figures rose strongly in March to new pandemic-era highs.

  • Consumers were assisted by $1,400 federal stimulus checks sent in March
  • Consumers are showing an increased eagerness to spend and
    demonstrating more confidence in the economy’s future.
  • Seasonally adjusted U.S. retail business sales rose 9.8% in March from
  • Homebuilders were quick to ramp up production and regain the form that
    has been powering activity
  • March housing starts rose 19.4% from February and 37% from a year ago
    to 1.739 million (SAAR).
  • Building permits rose to 1.766 million, up 2.7% from February and 30.2%
    from March 2020.
  • The rise in mortgage rates has stalled.
  • The rate on a 30-year fixed-rate mortgage retreated
  • Seasonally adjusted for-purchase mortgage applications have fallen
  • The outlook for mortgage rates is likely still upward

Things Are Looking Up

With all things considered, the housing market continues to prosper. As we continue this post-pandemic economic comeback, many new things will come to light. After all, life is not what it used to be since COVID-19 but as the U.S. economy and its driving force, the people, continue to innovate and overcome obstacles, so will the housing market.

If you're currently in the market to buy or sell your home and you need a quick
turnaround from someone who truly understands the industry and its trends, C2Financial Corporation is the right mortgage option for you. Call today, (818) 974-2842, and get on reach your housing goals in no time.

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