NAR Chief Economist Yun predicts low mortgage rates (3.1%) next year, a 3% home price increase, 9% existing-home sales increase, and a 23% surge in new-home sales.

The housing market defied high unemployment and an economic recession and surged during the COVID-19 pandemic – and that isn’t likely to let up heading into the winter months, says National Association of Realtors® (NAR) Chief Economist Lawrence Yun, chief economist of the National Association of REALTORS® during Tuesday’s “Residential Economic Issues & Trends Forum” at the virtual 2020 REALTORS® Conference & Expo.“2020 has been a year of surprises,” Yun said during NAR’s virtual convention – notably with a robust housing market in the middle of a global pandemic.“This winter may be one of the best winters for sales activity,” Yun said. “It won’t match summer or spring sales numbers, but on a winter-to-winter comparison, this could be one of the best breakout years just based on the fact that pending contracts are at such a higher level.”Mortgage applications are also up 20% year-over-year, which reflects the number of buyers in the pipeline approved for mortgages and ready to buy. Home prices are up too: The median existing-home price for all housing types was $311,800 in September – a 14.8% increase from a year ago.What else does 2021 hold? Yun thinks the persistent housing shortage will likely keep home prices elevated, while new- and existing-home sales will continue to rise as record-low mortgage rates and a work-from-home trend give housing markets a boost.

Yun’s 2021 housing forecast and a recap of 2020 

  • Mortgage rates: 3.1% (3% for 2020 forecast)
  • New-home sales: +23% (+20% for 2020)
  • Existing-home sales: +9% (+3% for 2020)
  • Home prices: +3% (+6% for 2020)
  • GDP growth: +4% (-5% for 2020)
  • Job gains: +3 million (-7 million for 2020)
  • 10-year treasury: 1% (0.9% for 2020)
  • Consumer price inflation: 1.6% (1% for 2020)

Low mortgage rates are key against higher prices, Yun said when he addressed Realtors during the conference. One major factor contributing to the hot housing market has been record-low mortgage rates, under 3%. Yun predicts rates will continue to stay low into 2021. Mortgage rates are helping housing affordability balance against rising home prices.Yun sees work-from-home trends drive housing preferences, with more Americans rethinking where they call home. About half of Americans who used to work in an office are still working from home, which sparked widespread office vacancies in many cities, Yun said. Several tech companies have even announced a permanent transition to working from home for their employees. That could mean the latest move-to-the-suburbs trend could continue after the pandemic too, Yun said.“‘Work from home’ can also now mean ‘work from vacation home,’” Yun added, noting a rise in home sales in vacation and resort areas since the pandemic. “If you don’t have to commute every day, you might not mind living farther out.”

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