By Jordan Grice
A buzzing housing market appears to have been a precursor to the nation’s post-pandemic bounceback, and real estate experts don’t see an end in sight as the economy recovers.
“What an amazing year for real estate, but…it’s been a difficult year on many fronts…fortunately, it looks like we are very close to getting back to normal,” said Lawrence Yun, chief economist for the National Association of REALTORS® (NAR).
Yun led an in-depth virtual session titled Residential Economic Issues and Trends Forum during NAR’s 2021 REALTORS® Legislative Meetings & Trade Expo on May 13. Yun said the national economy is “essentially back to full running,” with GDP recovery at roughly 99% of its pre-COVID levels in the first quarter of 2021.
“The GDP will soon reach an all-time high for the simple fact that the personal income—due to the stimulus measure—is substantially higher,” Yun said.
He predicted that the U.S. economy would grow by 4.5% this year as mass vaccination continues and consumer spending increases throughout the year.
Unemployment is still an issue as the nation tries to recover the 8 million jobs lost during 2020. Yun attributed the lag in job recovery to “friction in the labor market,” including workers being unable to return to their jobs, where work-from-home is not an option for many.
“We are gaining jobs but not fully back up to normal,” Yun said, adding that 4 million jobs are projected to be gained this year.
Housing market activity is still bustling under historically low mortgage rates and high demand, while the lagging supply of homes continues to play a role in the housing market frenzy.
According to Yun, new construction is ramping up, and ongoing progress in national vaccination is improving confidence to list homes.
A winding down of mortgage forbearance appears to be on the horizon as well. Moratoriums on foreclosures and evictions will end in June, with extended forbearance programs also close.
“If you are in a mortgage forbearance, you are not going to list, but once you find a job and are back to normal and out of the program [you] may want to sell [your] home to relocate, [which] may also bring more inventory into the market,” Yun said.
Price tags for existing and new homes, which recent NAR reports show double-digit gains nationwide, will ease up slightly with a slower increase of 7% pace projected for this year.
According to Yun, more supply is good news, but a decreasing demand as the housing market frenzy dies down isn’t.
“It’s likely to occur,” he said. “Higher home prices and higher mortgage rates are simply squeezing away those homebuyers that are right at the margin.”
Affordability may change as the year continues with a combination of price and mortgage rate increases slated to occur.
Thursday’s presentation noted that the economic recovery, both in the U.S. and globally, has raised inflationary pressures, leading to an increase in the 30-year fixed mortgage to an average of 3.2% in 2021.
While this doesn’t bode well for buyers in danger of missing their buying window, Yun said it also means frenzied activity—like multi-offer bidding wars—will decline as we proceed through the year.
“My assumption is that this is what will happen as we proceed through the year, and what we are finding is that the monthly payment will rise, and therefore there will be some squeezing out of the buyers,” Yun said.