It’s safe to say 2021 will be another in the steady progression of annual record sales years that began in 2012. The average annual gain since then has been 8.5%, and when the numbers are in for December, the number will be at the 11% mark.
Prices didn’t really take off until 2018. During the first 11 months of this year, it perked along for a 14.8% increase. Things can quickly change in prices world, but the local annual growth rate will be in double digits for the first time since 2005.
But that’s not the number people were talking about. The sweet spot for existing home sales has moved firmly into the $250,000 to $300,000 price range. Attribute that to the influx of new residents seeking a more affordable lifestyle and refuge from the woes of high-tax, high-density markets. The question is how close will the sweet spot come to becoming the new median. November’s median price was $210,000.
So, what does the data say about next year?
There’s little doubt that the local market will continue a stabilization process that began late this year. That’s sort of good news for buyers because sellers will lose some advantage. But they will still be in the drivers’ seat because demand continues to be greater than supply. And you know what that means.
Look for a small surge of new homes to hit the market next year. The first three quarters of this year was the best period for new home permits in over a decade. But balancing the market is going to take some time. The average build time for a new home varies from six months to a year, and there are several variables. So far this year – and it’s not expected to improve significantly until the latter half of next year – the strongest headwinds have been a slugging supply chair, a stubborn labor market, and higher material costs. During November, there was a 1.4-month inventory of homes on the market. A stable market is five to six months of inventory.
And while there’s consensus that the price growth rate will decelerate for it skyrocketing pace it’s a guessing game at what it will look like in 2022. The Home Price Expectations Survey points to an average of 4.5% on the national level. The National Association of Realtors (NAR) Chief Economist Lawrence Yun says the increase will come at a gentler pace. Expect to hear some numbers put to that explanation during NAR’s market forecast this week.
So far, Zillow has the most bullish national forecast for a 13.6% increase. Goldman Sachs is at 13.5%. Fannie May expects a 7.9% increase while Freddie Mac thinks it will be 7%.
But not everyone is as bullish. Redfin is prepping for a 3% increase. And CoreLogic foresees price growth slowing to 1.9%. The Mortgage Bankers Associations forecasts the median price will decrease by 2.5%.
Fortune says the bearish forecasts are based on the belief that mortgage rates will rise quickly next year.
Two big local questions about next year’s market are how long and how many new residents will show up, and can Millennials muster enough economic clout to sustain the local organic house formation rate? They’re in the demographic drivers’ seat, but where and how fast they will steer the markets is a question mark.
A stabilizing market, but the roller coaster ride isn’t over, is a safe bet.
Categories: REAL ESTATE