After the quickest recovery in the nation’s history, consumers with pandemic savings will “do more shopping, restaurant dining, traveling and in-person house hunting.”
WASHINGTON – After recording the quickest recovery in the nation’s history in the wake of the COVID-19 pandemic, the U.S. economy is expected to kick into high gear in 2021, according to analysis from the National Association of Realtors® (NAR) at its Residential Economic Issues and Trends Forum.
Thanks to the number of vaccinated Americans increasing and new coronavirus cases decreasing, the economy will grow 4.5% in 2021, according to NAR Chief Economist Lawrence Yun.
“Consumers will begin to spend massive savings, and do more shopping, restaurant dining, traveling and in-person house hunting,” Yun says.
While home sales have been, and will be, an economic bright spot, unemployment remains an issue, Yun adds. Eight million jobs were lost during the pandemic and have not yet been recaptured. Yun maintains that job recovery is taking longer due to some friction in the labor market, including some workers still unable to return to their jobs, with work-from-home not an option for them. As economic growth strengthens, however, NAR projects 4 million jobs will be added this year.
Unexpectedly and despite high unemployment, the economic recovery – propelled by favorable monetary and fiscal policies – created the hottest housing market in nearly 50 years. The market surpassed pre-pandemic levels in terms of sales, but the fast-paced recovery has also contributed to historic home price growth. In fact, an NAR report released Tuesday found that 89% of metros saw prices climb at double-digit rates on a year-over-year basis during the first quarter of 2021.
Thursday’s presentation noted that the economic recovery, both in the U.S. and globally, has raised inflationary pressures which will ultimately lead to an increase in the 30-year fixed mortgage to an average of 3.2% in 2021. Consumer price inflation is accelerating due to higher costs for a number of goods and commodities, including oil, gasoline, lumber, moving and storage fees, household appliances, rents and houses, which have reached record-highs.
“As mortgage rates increase, the frenzied multiple-offer situation will become less prevalent by year’s end, as affordability challenges squeeze out some buyers and more inventory reaches the market,” Yun predicts.
Although a low housing supply has played a significant role in home price surges, Yun expects more home construction, a growing willingness among homeowners to list properties due to an increase in vaccinations, and a gradual decline in mortgage forbearance.
“With more inventory and some easing in demand, home prices are expected to shift to mid-single-digit appreciation by the fourth quarter and in 2022,” Yun says. He predicts that:
- Median existing-home sales price will increase 7% in 2021
- Existing-home sales will grow by 10% as more homes reach the market
- New home sales will increase by 20%
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