What's on the Horizon for the Real Estate Market?
As the year comes to a closing, questions about what's to come are at the top of buyers' and sellers' minds. Record-low mortgage rates coupled with rising home prices kicked off a robust housing market in the first half of 2021. What does this tell us about the future market?
Mortgage Rates Will Likely Increase, but Will Remain Low
Experts are projecting an increase iterest 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 and still well below historical averages. Rates remaining low is excellent news for homebuyers who are looking to maximize their purchasing power. 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 to remain robust. Our forecast has total home sales, the sum of new and existing home sales, at 7.1 million in 2021…."
Price Spikes Will Continue, but Will Likely Plateau
Joe Seydl, Senior Markets Economist at J.P. Morgan, predicts that home prices will continue to rise. Homebuyers should consider buying sooner than later. Waiting for rates or home prices to fall may not be wise:
"Homebuyers—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 home 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
Home prices are rising, but we may see them plateau as waves of inventory hit the market. George Ratiu, Senior Economist at realtor.com, notes that we may see fewer inventory challenges. Slowing the fast-paced home price appreciation and creating more choices for buyers:
“We have seen more new listings this year compared to 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 home builds are also making great progress. Robert Dietz, Chief Economist at the National Association of Home Builders (NAHB), writes:
"As an indicator of the economic impact of housing, there are now 652,000 single-family homes under construction [which is] 28% higher than a year ago."
Bottom Line
As we look at the forecast for prices, interest rates, inventory, and home sales, we can remain optimistic about what's on the horizon for the end of 2021. Let's connect today to discuss how we can navigate the market together in the coming months.