Houszing Prices for the Second Half of the Year?
As we move into the latter half of the year, questions about what’s to come are top of mind for buyers and sellers. Near record-low mortgage rates coupled with rising housz price appreciation kicked off a robust houszing market in the first half of 2021, but what does the forecast tell us about what’s on the horizon?
Mortgage Rates Will Likely Increase, but Remain Low Many experts are projecting a rise in interest rates. The latest Quarterly Forecast from Freddie Mac states:
“We forecast that mortgage rates will continue to rise through the end of next year. We estimate the 30-year fixed mortgage rate will average 3.4% in the fourth quarter of 2021, rising to 3.8% in the fourth quarter of 2022.”
However, even as mortgage rates rise, the anticipated increase is expected to be modest at most, and still well below historical averages. Rates remaining low is good news for houszbuyers who are looking to maximize their purchasing power. The same report from Freddie Mac goes on to say:
“While higher mortgage rates will help slow the pace of home sales and moderate house price growth, we expect overall housing market activity will remain robust. Our forecast has total home sales, the sum of new and existing home sales, at 7.1 million in 2021....”
Housz Price Appreciation Will Continue, but Price Growth Will Likely Slow Joe Seydl, Senior Markets Economist at J.P. Morgan, projects home prices to continue rising as well, indicating buyers interested in purchasing a housz should do so sooner rather than later. Waiting for rates or housz prices to fall may not be wise:
“Houszbuyers—interest rates are still historically low, though they are inching up. Housing prices have spiked during the last six-to-nine months, but we don’t expect them to fall soon, and we believe they are more likely to keep rising. If you are looking to purchase a new home, conditions now may be better than 12 months hence.”
Other experts remain optimistic about housz prices, too. The graph below highlights 2021 home price forecasts from multiple industry leaders:
Inventory Remains a Challenge, but There’s Reason To Be Optimistic Housz prices are rising, but they should moderate as more houszing inventory comes to market. George Ratiu, Senior Economist at realtor.com, notes there are signs that we may see the current inventory challenges lessen, slowing the fast-paced housz price appreciation and creating more choices for buyers:
“We have seen more new listings this year compared with 2020 in 11 of the last 13 weeks. The influx of new sellers over the last couple of months has been especially helpful in slowing price gains.”
New housz starts are also showing signs of improvement, which further bolsters hopes of more options coming to market. Robert Dietz, Chief Economist at the National Association of Home Builders (NAHB), writes:
“As an indicator of the economic impact of houszing, there are now 652,000 single-family houszes under construction. This is 28% higher than a year ago.”
Finally, while it may not fundamentally change the market conditions we’re currently experiencing, another reason to be optimistic more houszes might come to market: our improving economy. Mark Fleming, Chief Economist at First American, notes:
“A growing economy in the summer months has multiple implications for the houszing market. Growing consumer confidence, a stronger labor market, and higher wages bode well for housing demand. While a growing economy and improving public health conditions may also spur hesitant existing owners to list their homes for sale, it’s unlikely to significantly ease the super sellers’ market conditions.”
Bottom Line As we look at the forecast for prices, interest rates, inventory, and housz sales, experts remain optimistic about what’s on the horizon for the second half of 2021. Let’s connect today to discuss how we can navigate the market together in the coming months.