Housing experts expect post-pandemic rebound
January 6, 2021
Spokane-Spokane Valley is expected to be a "top 10" market during and in a post-COVID environment, according to the National Association of Realtors®, which made the prediction as part of last month's second annual Real Estate Forecast Summit. It was the only area within Washington state to make the list.
In addition to demonstrated resilience, NAR considered a variety of indicators deemed to be influential for a metro area's recovery and growth prospects. The factors for the "top 10" list included unemployment rate; net domestic migration, including movers from expensive West Coast areas; 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.
"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," said Lawrence Yun, NAR chief economist and senior vice president of research.
Housing experts tended to be optimistic about a post-pandemic rebound, citing improving conditions for jobs and stable interest rates as key reasons.
More than 20 leading economic and housing experts participated in the summit, which was held virtually. Among their predictions they expect GDP growth of 3.5% and an annual unemployment rate of 6.2% this year. The forecasters believe the unemployment rate will decline to 5.0% in 2022.
Yun said another 9.8 million more jobs are needed to match the prior peak.
Housing prices are expected to rise 8.0% during 2021 and 5.5% the following year, while 30-year fixed mortgage rates are projected to be 3.0% this year and increase to 3.25% in 2022.
The panels of prognosticators also anticipate:
- Housing starts will total 1.5 million this year and 1.59 million in 2022.
- The share of U.S. workforce working from home will shrink from 21% in 2020 to 18% this year; by 2022, it is expected to shrink to 12%.
- Small declines in office and hotel vacancy rates in 2021, but a slight improvement in retail vacancies.
An overwhelming 90% of the experts surveyed expect the Federal Open Market Committee will make no change in the current federal funds rate of 0% during 2021. For 2022, a rate increase of 0.25% is predicted.
"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."
In his presentation, Yun said the months supply of inventory is at an all-time low.
In 2020, home sales will reach 5.52 million, the highest annual mark since 2006, with the median home price setting a record high of $293,000, according to NAR.
"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," stated NAR President Charlie Oppler, a Realtor® from Franklin Lakes, N.J., and the CEO of Prominent Properties Sotheby's International Realty.
The 2020 NAR Real Estate Forecast Summit consensus forecasts are compiled as the median of the responses of 23 economic and housing market experts who participated during the 2019 and 2020 summits. The survey was conducted from November 19 through December 4, 2020.