2021 Housing Forecast
Will home prices plummet in 2021? Will they go up? If so by how much? Let’s get into into it and take a look at the 2021 Housing Forecast.
The Phoenix area is set to see a surge in home sales in 2021 with prices continuing to rise more than the national average.
That’s according to Realtor.com’s 2021 Housing Forecast, which predicted home sales in the Valley next year to jump 11.4% over 2020 levels, the 11th-largest expected increase among the top 100 metros in the U.S.
Average prices are expected to jump 7% in the Phoenix Metro Area, which is the 12th biggest rise forecasted in the report. The Valley’s median sales price was up 17.5% this year. I think we’ll continue to see the sales price rise 8-9% in areas like Tempe, Mesa, Chandler and Gilbert and others closer to 5-6%.
ASU predicts that we’ll have 118,000 people move here in 2021 an increase over 2020’s 109,000. Single Family New Build Housing Permits are predicted to go up over 2020’s 40,800 to 46,900 in 2021. Most of these homes are being built on the outskirts, away from the large employment centers. The influx of people moving here will easily absorb those new builds. There is still strong demand for resale inventory as well and on average during 2020 we sold over 9,000 properties per month.
Nationally, home prices are expected to rise 5.7% next year, with existing home sales up 7% and housing starts up 9%. Arizona’s second-largest housing market, in Tucson, is expected to see a 3.4% year-over-year rise in home sales next year, with prices increasing by 4.5%, according to the forecast.
Nationwide, the analysis predicts inventory to make a steady comeback and give buyers some relief, but interest rates are expected to increase by the end of 2021, to 3.4%, combining with rising prices to make affordability a continuing challenge.
That affordability challenge will help slow the rise in prices as 2021 progresses, according to Realtor.com.
For sellers, the report said homes are likely to continue selling relatively quickly even though the time a home stays on the market will gradually increase next year in most places.
Some areas, however, will continue to see fast sales, the report said. THAT’S US!
In the Valley, where housing inventory hasn’t been able to keep up with demand all year, the average home was selling within 27 days in October, down from 39 days in October 2019 and our Inventory Absorption Rate is at 25.63 days.
The Realtor.com forecast said prices are expected to grow more slowly than in 2020. Still it will be a seller’s market nationally with the number of buyers expected to outweigh the number of homes on the market through the end of the year.
Suburban home sales could be among the strongest, especially if workers are able to continue working remotely, the report said, citing a trend that already has been underway for a few years and has picked up steam since the start of the Covid-19 pandemic.
It remains to be seen whether that trend will hold if a vaccine is made widely available and urban employers begin bringing employees back to their offices.That’s one of a few wild cards for the future of the housing market presented by the ongoing pandemic.
Another possibility with major implications for the housing market is a double-dip recession in 2021. As the U.S. continues in a K-shape recovery, a gap is widening between those with and without jobs. The current question is how long the K-shape can diverge before the impact begins to cascade into the broader economy and other previously less-affected sectors such as housing. Locally, Pre-Covid, we were #2 in job creation and ASU predicts that we will see growth in 2021 of 115,000 jobs created.
Bottomline, unlike in the last recession the Phoenix area is not going to see a hit like we did and will recover faster than the the rest of the country. Homes are extremely affordable and the quality of life is fantastic here in the valley! So get out there and find a home!!