Zillow reports that home prices continued to rise in October, reaching a pace not seen since the recession. Inventory around the United States remains low, causing prices to skyrocket as much as 10%+ in some parts of the country.
Home prices rose 2.2% since June, marking the largest rise in prices since 2013. The average home price was $259,906 due primarily to high demand and low inventory levels. Inventory remains 36% lower in October 2020 than in the same time period in 2019, as more homeowners are opting to remodel and renovate their homes than sell them.
Annual housing price growth is 5.8%, hitting the largest growth in two years.
Zillow 2021 Housing Market Growth Forecasts
The retail portal expects housing prices to rise 7% in 2021, up from previous forecasts of 4.8%, as inventory levels continue to remain low. Builders are working to fill the gap in housing, but higher lumber prices will keep prices of new homes higher.
Current homes for sale are engaged in bidding wars, with sellers receiving asking price or higher in many markets.
The low inventory trend is expected to persist until potential sellers are convinced that the market will remain strong. Reversal in housing prices will take several months to materialize, even if inventory started to increase immediately.
Home sales are expected to slow in the final quarter of the year. The trend is projected to remain until spring when sales are expected to remain above pre-pandemic levels through the remainder of 2021.
Fannie Mae’s 2021 Housing Market Growth Forecasts
Fannie Mae’s Doug Duncan, Senior VP and Chief Economist, reports his forecasts on HousingWire. He mentions the migration of a lot of big city residents to smaller cities, which is expected to keep housing market prices rising even in rural areas.
Sales are expected to rise one or more percentage in 2021. He notes that builders are seeing a surge in sales that will keep inventory levels subdued.
Duncan expects housing prices to continue rising, but he states that buyers will be able to secure lower mortgage rates. A “W” cycle may occur if COVID-19 resurges, causing sellers to hold off on putting their homes for sale due to fear that potential viewers may bring the virus into their homes.
The Feds keeping interest rates low may entice more would-be buyers to the market.
September new home sales cooled slightly from the summer months, falling 3.5% compared to August. The Northeast was the main driver in new homes sales slumping, as sales fell 28.9% in the region. Sales in the West helped offset the dip, rising 3.8%. New home sales in 2020 remain up 17% compared to the same period a year prior.
Historically, September is a slow month for home sales, with sales rising in the month only four times in nearly 60 years. Low mortgage rates are expected to fuel sales as buyers experience near-record low rates. New home sales may continue rising in 2021 as builders continue to offset record low housing inventories with newer homes in rural areas.