HOUSTON – (By Dale King, Realty News Report) – The coronavirus pandemic severely disrupted the U.S. economy, triggering spikes in unemployment, shuttering many restaurants and businesses, and forcing schools to adapt to remote learning. Early in the crisis, many analysts expected the housing market to suffer a dramatic downturn.
“We expected that the housing market would get slammed,” said Lawrence Yun, chief economist for the National Association of Realtors.
But after an initial shock, that steep decline in home sales across the country never fully materialized, Yun said while speaking on a panel of real estate economists during a virtual conference Wednesday.
Instead, home sales picked up as mortgage rates dropped, and economists on the panel said they expect the trend to continue for a period of time. The discussion took place on Day 1 of the National Association of Real Estate Editors’ 54th Annual Real Estate Journalism Conference (NAREE), which was carried online. The two-day event featured three economists on a session titled “Economic Forecast: COVID Era and Beyond,” moderated by Steve Brown of The Dallas Morning News.
With a renewed rise in COVID-19 cases putting additional strain on the economy and threatening the viability of many small businesses, panelists stressed the importance of federal support. For that reason, they urged Congress to work swiftly to approve stimulus measures; partisan negotiations had delayed a relief package for weeks.
Joining Yun on the panel were Frank Nothaft, chief economist at CoreLogic, and Danielle Hale, chief economist at Realtor.com. The panelists agreed that an economic rebound is likely in 2021, and signs of recovery were already visible by late 2020.
Not only did sales hold up in many markets, but housing prices remained resilient. Home values rose as a result of low mortgage rates combined with an ongoing shortage of available homes for sale. Yun reported that home prices increased by 4.9 percent in 2019, accelerated to 6 percent in 2020, and are projected to rise another 3 percent in 2021.
Hale laid out a specific forecast for 2021: she projected a 7 percent increase in home sales and a 5.7 percent rise in home prices. She also estimated average mortgage rates around 3.2 percent, with a modest uptick to roughly 3.4 percent by the end of the year. In addition, she expects housing starts to climb by about 9 percent as builders respond to sustained demand.
Mortgage rates have recently dipped below 3 percent, creating strong incentives for refinancing and for buyers to lock in low financing costs. Nothaft echoed that view, emphasizing that low rates are a primary driver behind the housing market’s unexpected strength.
Nothaft summarized several key points:
- Mortgage rates remain at historically low levels, supporting both refinances and home purchases. He expects low rates to continue through 2021 and into 2022.
- Refinance volume in 2021 will likely be lower than the ultra-active year of 2020, but still higher than 2019.
- The U.S. Home Price Index is forecast to rise in 2021, though at a slower pace than in 2020.
- Affordable housing remains a persistent challenge for many families across the country.
- Distressed sales are likely to increase as pandemic-related assistance winds down, but they should remain far fewer than during the Great Recession.
Nothaft warned that growing mortgage delinquencies pose a serious risk. “Forbearance provides a financial crutch,” he said. “But if income recovery stalls, distressed sales will rise.” He noted that serious delinquencies, which fell to about 1.2 percent in February 2019, climbed to a high of roughly 4.2 percent by September 2020.
The list of the top 10 housing markets at that time leaned heavily toward the West Coast, featuring Sacramento, San Jose, Seattle, Oxnard and Riverside, California. Other strong markets included Denver, Phoenix, Boise, Harrisburg, Pennsylvania, and Charlotte, North Carolina.
Realtor.com highlighted two Texas metropolitan areas as showing robust growth: the Dallas–Fort Worth–Arlington region, which saw sales increase by 11.3 percent and prices rise by 7.3 percent, and the Houston–The Woodlands–Sugar Land area, with sales up 5.3 percent and prices up 4.6 percent.
Another lasting effect of the pandemic is the rise in remote work, which is reshaping buyer preferences. Yun observed that many people will seek larger homes to accommodate dedicated home offices and learning spaces. Hale noted that the shift toward working from home may also push some buyers to prioritize suburban locations and more space, drawing them away from dense urban cores.
Dec. 10, 2020 Realty News Report Copyright 2020
File: Covid-Era Home Sale
Photo Credit: Ralph Bivins, Realty News Report. Copyright 2020
File: (2) #NAREE2020. Economists: Covid-Era Home Sale Surge to Continue.