Top Economic and Housing Experts Predict Post-Pandemic Rebound With Continued Job Growth, Stable Interest Rates in 2021
WASHINGTON (December 10, 2020) – Expect the post-pandemic economic rebound, improving job conditions and stable interest rates to continue in 2021, according to a survey of more than 20 top U.S. economic and housing experts. Lawrence Yun, NAR chief economist and senior vice president of research, unveiled the consensus forecast today during NAR's second annual Real Estate Forecast Summit.
The group of experts predicted:
Gross Domestic Product growth of 3.5% in 2021 and 3.0% in 2022;
An annual unemployment rate of 6.2% next year with a decline to 5.0% in 2022;
Average annual 30-year fixed mortgage rates of 3.0% and 3.25% for 2021 and 2022, respectively;
Annual median home prices to increase by 8.0% in 2021 and by 5.5% in 2022;
Housing starts of 1.50 million next year and 1.59 million in 2022;
The share of the U.S. workforce working from home to be 18% in 2021 – down from 21% in 2020 – and 12% in 2022; and
Small declines in office and hotel vacancy rates in 2021, with a slight increase in retail vacancies next year.
When asked if the Federal Open Market Committee will change the federal funds rate in 2021, 90% of the experts surveyed said they expect no change in the current rate of 0%. For 2022, the experts predict a rate increase of 0.25%.
"It is an understatement to say the year 2020 has been filled with challenges and full of surprises," said Yun. "Yet, one astonishing development has been the hot housing market as consumers eyed record-low mortgage rates and reconsidered what a home should be in a new economy with flexible work-from-home schedules."
In 2020, home sales will reach 5.52 million, the highest annual mark since 2006, with the median home price setting a record high of $293,000, according to NAR.
Top 10 Real Estate Markets During and in a Post-COVID-19 Environment
NAR identified 10 markets that have shown resilience during this pandemic period and are expected to perform well in a post-COVID-19 environment in the next two years. In alphabetical order, the markets are:
Atlanta-Sandy Springs-Alpharetta, Georgia
Boise City, Idaho
Charleston-North Charleston, South Carolina
Dallas-Fort Worth-Arlington, Texas
Des Moines-West Des Moines, Iowa
Spokane-Spokane Valley, Washington
"Some markets have been performing exceptionally well throughout the pandemic and they'll likely carry that momentum well into 2021 and beyond because of strong in-migration of new residents, faster local job market recoveries and environments conducive to work-from-home arrangements and other factors," Yun said.
NAR identified the top 10 metro areas by considering a variety of indicators that it views to be influential to a metro area's recovery and growth prospects in a post-pandemic environment over the next two years, including: unemployment rate; net domestic migration, including movers from expensive West Coast areas; share of workers in retail trade, leisure and hospitality industries; mobility to retail and leisure places; and the fraction of the workforce working from home, among others.
"As we look towards 2021 and beyond, expect these 10 markets to perform strongly with potential buyers finding conditions particularly favorable to purchase a home," said NAR President Charlie Oppler, a Realtor® from Franklin Lakes, N.J., and the CEO of Prominent Properties Sotheby's International Realty. "Overall, residential real estate will continue to be an important driver of our nation's economic recovery and the activity in these markets will help lead the way."
Low unemployment rates compared to the national average signaled strong employment environments for residents of these areas. At 4.2%, Provo-Orem boasts the lowest unemployment rate among those listed, followed by Madison at 4.3%, Charleston at 4.7% and Des Moines at 5%.
Areas that are already attractive destinations to purchase a home, especially among movers from more expensive West Coast cities, may attract more technology workers, many of whom are from organizations with very flexible, and in some cases permanent, work-from-home policies. Overall, the Phoenix metro area attracted the largest number of movers from West Coast metro areas, with Dallas ranking second. Atlanta had the highest share of workers working from home at 8.8%, compared to the national share of 5.6%. Spokane also had a high fraction of the workforce work from home at 7.2%.
The 2020 NAR Real Estate Forecast Summit consensus forecasts are compiled as the median of the responses of 23 economic and housing market experts who participated during the 2019 and 2020 summits. The survey was conducted from November 19 through December 4, 2020.
The National Association of Realtors® is America's largest trade association, representing more than 1.4 million members involved in all aspects of the residential and commercial real estate industries.