It’s been a rollercoaster of a year for real estate. I don’t need to reiterate the many low-points in the economy that have punctuated 2020 like commas in a Faulkner paragraph. But 2020 has been marked an exceptional year in the housing market. Everyone I know is asking the same question: “What about next year?”
Someone who should know the answer to that question is Larry Yun, chief economist for the National Association of Realtors who we have written about many times in the past. In his annual look at the economy and housing market at NAR’s annual conference, the Realtors Conference and Expo, held last Tuesday, November 17 at the Residential Economic Issues and Trends Forum, he predicted higher home sales, higher home prices, stable mortgage rates and continuing low inventory.
Thank you Santa Yun!
His outlook is blush-worthy for all of 2021, with a few exceptions. He says, “My economic forecast is that in 2020, it is a recession, but in 2021 with the vaccine discovery and availability, it will be positive. The interest rate environment will continue to be low, inflation not really a problem. Mortgage rates should remain stable near 3 percent all the way through 2021.”
Yun is particularly optimistic about new home sales, and predicts next year will end with a stunning 23% increase. Likewise, he sees existing home sales increasing by 9% next year, with no decline in price because of the housing shortage which will continue as it has the past few years.
He applauds President-Elect Biden’s proposed $15,000 home buyer credit, which for middle-income families will provide a lovely assistance in finding a down payment. On the other hand, Yun’s not happy about Biden cancelling the 1031 exchange tax break because builders often use it when purchasing land for development.
Yun is most worried about a second nationwide lockdown paralyzing the economy. “If it is a nationwide lockdown, in my own personal opinion, it will be very harmful for the economy. Of course, we have to balance that out with the health measures, but at least related to the economy, it will be a devastating blow in terms of facing a second recession just as we are trying to come out of it,” Yun said.
He summarized his statement by pointing out that whatever the housing market will do in 2021, it will be money that matters. “Are the mortgage rates low, are the prices right, is the inventory available? It’s all about the economic factors and housing conditions,” he said.
The Bottom Line:
Anyone thinking of selling their home should list it now. Low inventory continuing into next year will keep buyers scrambling for homes, even during the holiday season. Sellers can avoid the anticipated competition in the new year by getting on the market now.