Twenty-three housing and economic
experts have told the National Association of Realtors® (NAR) they expect the
post-pandemic economic rebound to continue, with improving job conditions and
stable interest rates in 2021. NAR’s
chief economist Lawrence Yun revealed the results of a 2- person survey last
week at NAR’s second annual Real Estate Forecast Summit.
The group of experts
predicted that the Gross Domestic Product (GDP) would grow by 3.5 percent in
2021 and 3.0 percent the following year and unemployment would average 6.2
percent next year, declining to 5.0 percent in 2022. Low mortgage rates will
persist over the next two years, although not at today’s sub-3.0 percent level.
They forecast an increase to 3.0 percent and 3.25 percent in 2021 and 2022,
respectively. Ninety percent of those surveyed said they expect the federal
funds rate to remain at zero next year with a 0.25 percent increase in 2022.
The housing market will
remain a strong component of the recovery. In 2020, home sales will reach 5.52
million, the highest annual level since 2006 and housing prices will grow 8.0
percent next year, with the median home price setting a record high of $293,000.
Appreciation will slow in 2022 to 5.5 percent. There will be 1.50 million and
1.59 million housing starts in 2021 and 2022, respectively.
There won’t be quite as many people
working from home, the share will decline from 21 percent this year to 18 then
12 percent over the next two years. Office and hotel vacancy rates will see
small declines next year while retail vacancies will increase slightly
“It is an understatement
to say the year 2020 has been filled with challenges and full of surprises,”
said Yun. “Yet, one astonishing development has been the hot housing market as
consumers eyed record-low mortgage rates and reconsidered what a home should be
in a new economy with flexible work-from-home schedules.”
NAR identified 10
markets that have shown resilience during this pandemic period and are expected
to perform well in a post-COVID-19 environment. In naming these metro areas, NAR
considered a variety of indicators that it views to be influential to an area’s
recovery and growth prospects, including the unemployment rate; net domestic
migration which includes people moving from expensive West Coast areas; the share
of workers in retail trade, leisure, and hospitality industries; mobility to
retail and leisure places; and the fraction of the workforce working from home.
The markets, in alphabetical order, are:
Boise City, Idaho
Des Moines, Iowa
“Some markets have been
performing exceptionally well throughout the pandemic and they’ll likely carry
that momentum well into 2021 and beyond because of strong in-migration of new
residents, faster local job market recoveries and environments conducive to
work-from-home arrangements and other factors,” Yun said.
“As we look towards 2021
and beyond, expect these 10 markets to perform strongly with potential buyers
finding conditions particularly favorable to purchase a home,” said NAR
President Charlie Oppler. “Overall, residential real estate will continue to be
an important driver of our nation’s economic recovery and the activity in these
markets will help lead the way.”
Low unemployment rates compared to
the national average signaled strong employment environments for residents of
these areas. At 4.2 percent, Provo-Orem boasts the lowest unemployment rate
among those listed. Madison, Charlestown, and Des Moines have rates of 5
percent or less.
Areas that are already attractive
destinations to purchase a home, especially among movers from more expensive
West Coast cities, may attract more technology workers, many of whom are from
organizations with very flexible, and in some cases permanent, work-from-home
policies. Overall, the Phoenix metro area attracted the largest number of
movers from West Coast metro areas, with Dallas ranking second. Atlanta had the
highest share of workers working from home at 8.8 percent, compared to the
national share of 5.6 percent.