Top national real estate economists at an online conference Wednesday predicted home prices would continue to rise in 2021.
The well-known analysts said a lot of the same factors that pushed up prices this year — low mortgage rates and lack of homes for sale — would continue next year. They were speaking at the 54th annual conference of the National Association of Real Estate Editors, online for the first time because of COVID-19.
They said what will likely be different next year will be an increase in homes for sale, which should slow price appreciation. It should be noted many of their predictions hinged on widespread vaccination occurring throughout 2021.
Frank Nothaft, a senior vice president and chief economist at CoreLogic, predicted national prices would increase 4.1%. That is down from a 7.3% annual increase as of October.
He said low home inventory has led to rapidly increasing prices across the nation as dedicated buyers compete for a limited number of homes. However, he said the number of homes for sale will increase with widespread vaccination for the coronavirus, which kept some of the most vulnerable homeowners from selling this year.
“Older homeowners at greater risk of complications from COVID-19, and who have flexibility in the time of their listing, chose to postpone listing their home until we were post-pandemic,” Nothaft said.
Lawrence Yun, chief economist at the National Association of Realtors, said what a lot of people might have been thinking: That many experts were taken back by how much prices soared throughout the pandemic.
He said he expected home prices to stay stable in 2020 throughout the pandemic-induced downturn, primarily because credit requirements for mortgages are much higher now than before the Great Recession. Also, he said home inventory was low even before the pandemic, so that should have kept demand steady.
“I did not anticipate home prices to soar once the economy reopened,” Yun said. “It was quite a surprise.”
He predicted home prices would increase 3% in 2021, down from his end-of-year forecast for 2020 of 6%.
Yun said he hopes, for affordability reasons, that prices will not appreciate as quickly as they did this year. He said a new stimulus package from the federal government will be crucial for parts of the economy that have been hardest hit by shutdowns.
Danielle Hale, chief economist at Realtor.com, predicted home prices would increase 5.7%. She predicted the average mortgage rate would be around 3.2% in 2020, remaining near historic lows.
“The economic backdrop is strong growth in a healing economy,” Hale said.
No one predicted widespread foreclosures if unemployment remains high because of growing equity in homes as prices rose in 2020. Simply put: Even if owners are falling behind on mortgages, they still have a very strong market to sell before they get foreclosed on. Nothaft said many families were helped by forbearance programs that allowed them to pause payments but it isn’t a guarantee there won’t be some homes lost.
“The (federal) forbearance program will help to mitigate how many of these seriously delinquent loans go into distressed sales,” Nothaft said. “But it will not prevent all of them.”
Yun went so far as to say that even if home prices dropped by 5% next year that it likely would not create an avalanche of foreclosures because of increased equity.
Home price increase predictions in 2021
Danielle Hale, chief economist at Realtor.com: 5.7%
Lawrence Yun, chief economist at the National Association of Realtors: 3%
Frank Nothaft, a senior vice president and chief economist at CoreLogic: 4.1%