The housing market made an incredible recovery in 2020 and is now positioned for an even stronger year in 2021. Record-low mortgage interest rates are a driving factor in this continued momentum, with average rates hovering at historic all-time lows.
According to the latest Realtors Confidence Index Survey from the National Association of Realtors (NAR), buyer demand across the country is incredibly strong. That’s not the case, however, on the supply side. Seller traffic is simply not keeping up. Here’s a breakdown by state:As the maps show, buyer traffic is high, but seller traffic is low. With so few homes for sale right now, record-low inventory is creating a mismatch between supply and demand.
NAR also just reported that the actual number of homes currently for sale stands at 1.28 million, down 22% from one year ago (1.64 million). Additionally, inventory is at an all-time low with 2.3 months supply available at the current sales pace. In a normal market, that number would be 6.0 months of inventory – significantly higher than it is today.
What does this mean for buyers and sellers?
Buyers need to remain patient in the search process. At the same time, they must be ready to act immediately once they find the right home since bidding wars are more common when so few houses are available for sale.
Sellers may not want to wait until spring to put their houses on the market, though. With such high buyerdemand and such a low supply, now is the perfect time to sell a house on optimal terms.
Bottom Line
The real estate market is entering the year like a lion. There’s no indication it will lose that roar, assuming inventory continues to come to market.
According to the latest CoreLogic Home Price Insights Report, nationwide home values increased by 8.2% over the last twelve months. The dramatic rise was brought about as the inventory of homes for sale reached historic lows at the same time buyer demand was buoyed by record-low mortgage rates. As CoreLogicexplained:
“Home price growth remained consistently elevated throughout 2020. Home sales for the year are expected to register above 2019 levels. Meanwhile, the availability of for-sale homes has dwindled as demand increased and coronavirus (COVID-19) outbreaks continued across the country, which delayed some sellers from putting their homes on the market.
While the pandemic left many in positions of financial insecurity, those who maintained employment and income stability are also incentivized to buy given the record-low mortgage rates available; this is increasing buyer demand while for-sale inventory is in short supply.”
Where will home values go in 2021?
Home price appreciation in 2021 will continue to be determined by this imbalance of supply and demand. If supply remains low and demand is high, prices will continue to increase.
Housing Supply
According to the National Association of Realtors (NAR), the current number of single-family homes for sale is 1,080,000. At the same time last year, that number stood at 1,450,000. We are entering 2021 with approximately 370,000 fewer homes for sale than there were one year ago.
However, there is some speculation that the inventory crush will ease somewhat as we move through the new year for two reasons:
1. As the health crisis eases, more homeowners will be comfortable putting their houses on the market.
2. Some households impacted financially by the pandemic will be forced to sell.
Housing Demand
Low mortgage rates have driven buyer demand over the last twelve months. According to Freddie Mac, rates stood at 3.72% at the beginning of 2020. Today, we’re starting 2021 with rates one full percentage pointlower than that. Low rates create a great opportunity for homebuyers, which is one reason why demand is expected to remain high throughout the new year.
Taking into consideration these projections on housing supply and demand, real estate analysts forecast homes will continue to appreciate in 2021, but that appreciation may be at a steadier pace than last year. Here are their forecasts:
Bottom Line
There’s still a very limited number of homes for sale for the great number of purchasers looking to buy them. As a result, the concept of “supply and demand” mandates that home values in the country will continue to appreciate.
Updated Jan 14, 2021; Posted Jan 13, 2021 By Shane Dixon Kavanaugh | The Oregonian/OregonLive https://www.oregonlive.com/news/2021/01/more-than-100-new-affordable-apartments-greenlit-for-n-portland-neighborhood.html
Cathedral Village will bring more than 100 new apartments with low and very low rent to the St. Johns neighborhood. (Portland Housing Bureau)
The Portland City Council greenlit funding Wednesday for an affordable housing project that will bring more than 100 new apartments with low and very low rent to the St. Johns neighborhood.
The unanimously approved measure will provide about $17.4 million in Portland housing bond revenue for Cathedral Village, whose construction in the 8600 block of North Crawford Street will begin this year.
With sweeping views of the nearby St. Johns Bridge, the four-story, 110-unit building will offer low-income Portlanders a place to live within walking distance of grocery stores, public transit and Cathedral Park, city officials
More than half the apartments will have two or three bedrooms, a size geared toward families, documents show. Two-thirds will be available to Portlanders who earn up to 60% of the city’s median income while the rest will be reserved for those who earn 30% or less.
For a family of four, those figures were $55,260 and $27,640, respectively, last year, according to the Portland Housing Bureau.
The development, which carries a total price tag of just over $38 million, is a collaboration between non-profit Catholic Charities of Oregon and for-profit Related Northwest.
Its pending ground-breaking comes two months after developers Northwest Related and Central City Concern began construction on the Crescent Court Apartments, a $40.7 million, 138-unit affordable housing project in the 11500 block of Southeast Division Street.
On December 28, 2020, the FAA released new final rules for certain uses of Unmanned Aerial Systems, (UAS, or drones), the result of a multi-year undertaking. These new rules build upon previous rulemakings which expanded UAS operations to allow for commercial use and eased restrictions for those operators, along with creating the small-UAS (less than 55 lbs) and micro-UAS (4.4. lbs or less) categories of vehicles. The new regulations do several things: 1) they require remote identification technology for UAS; 2) they expand UAS commercial operations to allow for over-crowd flights, creating different restrictions based on the category the UAS falls into (more below); and 3) they establish a system for allowing operators to conduct UAS flights at night.
Previously, the FAA had allowed commercial UAS flights only over people on the ground who were participants in the operation itself. Under the new regime, certain types of UAS will be able to fly over crowds regardless of their knowledge or participation in the operations; others will have more restricted abilities. To accomplish this, the FAA created new categories for UAS:
Category 1: The only category based solely on weight. It is for UAS weighing .55 lbs or less. These UAS can fly over crowds regardless of if they are participating in the operation or not, as long as remote identification technology has been enabled.
Categories 2 – 4 are UAS that weigh more than .55 lbs and meet certain FAA safety standards, with the standards for Category 2 being highest, then Category 3, and finally Category 4. As the standards are lowered by category, the limitations on what those UAS can do are raised.
Category 2: Can fly over crowds, but not over open air assemblies.
Category 3: Can fly over people participating in the operation or within an enclosed/restricted space and the people within have been notified that a UAS may fly over them.
Category 4: Requires an “airworthiness certificate” from the FAA (Part 21), and is restricted to operations allowed according to it.
In addition, UAS Categories 1-3, if eligible to fly over people, can operate over moving vehicles when in transit (sustained flights over moving vehicles are prohibited).
The new rule also allows for commercial small-UAS (less than 55 lbs) flights at night. To fly at night, remote pilots must either complete an updated initial test or the updated recurrent online training prior to conducting a night operation. In addition, their small-UAS must be equipped with operational anti-collision lights that can be seen for 3 statute miles and have a flash rate sufficient to avoid a collision.
These updated rules expand the legal operational capabilities of commercial UAS and provide flexibility for operators who use them in their businesses, including real estate professionals. The FAA continues to work on regulations to allow for commercial UAS flights that go “beyond-visual-line-of-sight” (BVLOS). NAR will continue to work with the FAA to develop UAS regulations and advocate for common-sense rules which allow UAS to meet their full potential for real estate professionals while protecting the safety and privacy of people on the ground.
This year challenged us to reprioritize everything – from the way we use our time to where we work, how we socialize and gather together, and our needs at home. For many, this also meant making decisions about how to best support and engage with our extended families, near and far.
In some cases, we weren’t able to see our relatives and loved ones who were living in senior facilities. In others, maybe older children moved back home. Jessica Lautz, Vice President of Demographics and Behavioral Insights for the National Association of Realtors (NAR), says:
“A lot of families have an aging senior relative who was living independently or in senior care and wanted to move them into their home.”
These changes led more homebuyers to invest in multi-generational homes to accommodate more long-term plans. A multi-generational home, according to the 2020 Profile of Home Buyers and Sellers from NAR, is a home that has adult siblings, adult children over the age of 18, parents, and/or grandparents in the household.
A recent study from NAR shows that since the health crisis began, there’s been an increase in purchasing trends for homes that cater to this dynamic:
“Buyers who purchased after March were more likely to purchase a multi-generational home at 15% compared to 11% who purchased before April.”
There are many reasons for this uptick in preference toward multi-generational homes. The graph below shows the top two reasons and how they’ve increased this year:
Bottom Line
More homeowners are making arrangements to accommodate their loved ones so they can safely take care of them at home. If you’re in a similar situation, let’s connect to discuss your options in our local area and maybe even have your whole family under one roof by early next year.
Pending home sales slightly decreased 2.6% in November from the prior month, the third consecutive month of decline. All regions experienced month-over-month declines.
Nationally, contract signings jumped 16.4% from one year ago with all regions reaching double-digit year-over-year increases.
The Pending Home Sales Index hit 125.7, an all-time high for November.
WASHINGTON (December 30, 2020) – Pending home sales declined in November, according to the National Association of Realtors®. Month-over-month contract activity fell in each of the four major U.S. regions. However, compared to a year ago, all four areas achieved gains in pending home sales transactions.
The Pending Home Sales Index (PHSI),* www.nar.realtor/pending-home-sales, a forward-looking indicator of home sales based on contract signings, fell 2.6% to 125.7 in November, the third straight month of decline. Year-over-year, contract signings climbed 16.4%. An index of 100 is equal to the level of contract activity in 2001.
“The latest monthly decline is largely due to the shortage of inventory and fast-rising home prices,” said Lawrence Yun, NAR’s chief economist. “It is important to keep in mind that the current sales and prices are far stronger than a year ago.”
“The market is incredibly swift this winter with the listed homes going under contract on average at less than a month due to a backlog of buyers wanting to take advantage of record-low mortgage rates,” Yun said.
Yun predicts a favorable outlook for the housing market in the coming year. According to his 2021 projections, there will be a slight upward rise in mortgage rates to around 3% from the current 2.7% rate. Existing-home sales are expected to increase roughly 10% and new home sales by 20% next year.
“Economic growth is guaranteed from the stimulus package and from vaccine distribution, but high government borrowing will put modest upward pressure on interest rates,” he said.
November Pending Home Sales Regional Breakdown
The Northeast PHSI slid 3.3% to 108.6 in November, a 15.3% increase from a year ago. In the Midwest, the index fell 3.1% to 115.9 last month, up 14.1% from November 2019.
Pending home sales in the South decreased 1.1% to an index of 150.0 in November, up 21.3% from November 2019. The index in the West fell 4.7% in November to 111.3, which is up 10.4% from a year ago.
The National Association of Realtors® is America’s largest trade association, representing more than 1.4 million members involved in all aspects of the residential and commercial real estate industries.
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*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.
The index is based on a large national sample, typically representing about 20% of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales contract activity parallels the level of closed existing-home sales in the following two months.
An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.
NOTE: Existing-Home Sales for December will be reported January 22. The next Pending Home Sales Index will be January 29; all release times are 10:00 a.m. ET.
