How things are looking up in the housing market! Let's take a detailed overview of the latest housing market trends & predictions for 2021. We shall discuss key industry takeaways and insights into the US housing market — such as the latest overall real estate trends, price & rent growth, housing sales & supply, and mortgage rates & delinquencies. The real estate market has been unusually strong this year, with robust housing demand in nearly every region of the country.
Home price growth continues to surge due to tight supply and lower interest rates or borrowing costs. With the recovering economy, more buyers are entering the market. And since there remains a limited supply of housing inventory, home prices in a low mortgage rate environment may rise even more. The average prices of single-family houses with mortgages guaranteed by Fannie Mae and Freddie Mac advanced 1.4 percent from a month earlier in March 2021, the most since last October and following an upwardly revised 1.1 percent growth in February.
The differences between today's frenetic housing market and last year's frozen market are quite significant. We are having a residential housing boom driven by the improving economy and millennials reaching their prime homebuying years. Low mortgage rates and an increase in working from home ignited by the pandemic have fueled a rapid increase in housing demand — especially in lower-density suburbs. More existing homes were sold in 2020 than in any year since 2006.
According to Realtor.com, the typical home asking price hit another new high in May 2021 by reaching $380,000, an increase of 15.2% compared to last year. While home prices never fell, they were flat this time last year. However, the pace of home price appreciation has slowed from last month by 2 percentage points. Relief is not yet on the horizon for homebuyers as inventory continues to shrink. The median home price is forecasted to reach more highs in the coming months before the cooling-off trends begin this fall.
More owners are putting homes up for sale this year as a result of which a record-high share of homes for sale are “new listings.” At the same time, these homes are selling fast with time on the market being 32 days shorter than at this time last year. This means while the influx of sellers will help relieve some of the competitive pressure buyers are facing they still need to make their offers strong enough to beat out a multiple-bid scenario.
According to the latest data released by the National Association of Realtors, existing-home sales declined for the third straight month in April. This decline is the result of the low inventory and swiftly rising prices. The supply of homes for sale at the end of April was down 20.5% from one year ago. There were 1.16 million homes for sale, representing a 2.4-month supply at the current sales pace.
Sales of existing homes dropped 2.7% in April from March to a seasonally adjusted annualized rate of 5.85 million units. Sales were 33.9% higher than April 2020 when the housing market had shut down at the start of the pandemic. In the previous month, the existing home sales had fallen 3.7% from the prior month to a seasonally-adjusted annual rate of 6.01 million.
“Despite the decline, housing demand is still strong compared to one year ago, evidenced by home sales from this January to April, which are up 20% compared to 2020,” said Lawrence Yun, NAR's chief economist. All but one of the four major U.S. regions witnessed month-over-month drops in home sales, but each registered double-digit year-over-year gains for April. The Midwest housing market was the only region to see sales growth between March and April, with a 0.8% uptick. The Northeast had the biggest decline, with a 3.9% drop in sales.
Pending home sales decreased 4.4% in April from the prior month, in part due to record-low inventory of homes for sale in the first quarter of 2021, according to NAR. All four U.S. regions recorded year-over-year increases, but only the Midwest witnessed month-over-month gains in terms of pending home sales contract transactions. Pending housing sales are a forward-looking indicator of closed sales.
Because of the typical duration of time, it takes for a housing sale to close, experts consider pending sales to be a decent indicator of potential future closed sales in one to three months. It is important to bear in mind, however, that not all signed contracts will be closed successfully. as they are susceptible to changes in market conditions such as the availability of financing for homebuyers.
Will This Housing Boom Last or Crash?
The housing industry and its economic factors depend on supply and demand. The existing home sales data shows the tightest housing market on record. The demand has not gotten significantly shorter since last May/June, and buyers and sellers are continuing to connect at a record pace. This trend shows that the housing market is as strong as it was during the housing bubble. It is nowhere too close to a level where you can imagine the balance of real estate market conditions. Speedy home sales continue in all regions of the country and the median sales price continues to have double-digit growth.
Although millions were laid off or furloughed it didn’t prevent house hunters from buying homes across the nation. As a result, the housing market saw the highest pace of sales growth since the height of the unprecedented housing boom in 2005. That expansion was driven by negligent lending in the subprime mortgage market and the current housing boom is driven by the intense demand and record-low mortgage rates. Both of these factors were driven by the coronavirus pandemic.
The housing market has seen record-breaking growth since last June after briefly put on hold during the outbreak of the pandemic this spring. As prices keep climbing month-over-month, it just shows the resilience of the US housing market in the face of an ongoing economic recession. Although sellers are listing more & more homes we need more new home supply to add to inventory and slow these sharp price increases.
When Many market watchers are curious to know how long will this housing boom last or will the market eventually crash? Well, so far, the housing market continues to be sizzling hot resulting in higher home prices and quick-selling homes. The only factor of concern is the housing supply which continues to fall short of demand. Increasing the supply of homes for sale would certainly help bring balance to this strong seller’s market, but the most recent housing market trends don't suggest that inventory is likely to improve soon.