Housing Market Predictions 2021: Experts' Forecast Post COVID-19 (2023)

After the COVID-19 pandemic came into being, US housing market predictions 2020 went from optimistic to pessimistic as the lockdown intended to slow the spread of the coronavirus has stalled the real estate market. This current market stall presents a unique challenge when tracking how real estate trends are performing now and what to expect moving forward. But recently, a number of housing and economic experts have issued their real estate market forecasts for the US. In this article, we break down these predictions for real estate investors to understand what to expect through the end of 2020 and into 2021.

Related: The Future of Real Estate Investing After the Pandemic

1) Home Prices Predictions

The first housing market forecast comes from Freddie Mac. In its latest outlook, the economic and housing research group predicted that US home prices would level off or dip slightly (0.5%) over the next four quarters. They also expect that house values would rise again sometime during the latter part of 2021. According to Freddie Mac, they don’t expect house prices to dip significantly because the “fiscal stimulus provided by the CARES Act will mute the impact that the economic shock has on house prices”.

However, a recent forecast from the housing research team at Zillow offers a gloomier prediction for housing prices. Zillow’s latest forecast is based on the assumption that the GDP will decrease by 4.9% in the United States this year and then increase by 5.7% in 2021. Under this scenario, Zillow forecasts house prices to drop by 2% – 3% by October from their February values.But like Freddie Mac, experts at Zillow also predict a slow recovery, estimating that home prices will return to their pre-coronavirus levels by late summer of 2021.

Meaning, general housing market predictions are that housing prices will fall through the end of 2020 before recovering in Q3 of 2021. This is good news for real estate investors looking to buy a rental property in a strong housing market. But keep in mind that home prices are unlikely to fall to the bargain-basement prices many were hoping for. So if you want to get into real estate investing, we recommend making your move while housing prices and mortgage rates are low. To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.

2) Home Sales Predictions

According to Realtor.com, the pace of home sales relative to inventory reached a new record high in February, as sellers gained leverage and buyers benefited from lower mortgage rates. But the federal government’s shutdown of “non-essential businesses” has paused most real estate transactions.Anew report from Fannie Mae forecasts that home sales will fall by nearly 15% in 2020 compared to 2019 numbers. The mortgage giant currently predicts the economy and home sales both to rebound in 2021. However, that rebound is depending on the pandemic’s trajectory.

(Video) It Started: The Housing Market Is Collapsing

Zillow’s recent report also includes their housing market predictions for home sales. The company expects a whopping 50% – 60% decline in home sales from its pre-coronavirus levels. Experts at Zillow forecast home sales to bottom out in Q2 2020 before they slowly recover to baseline levels by the end of 2021. Another US real estate market forecast from Zillow is that nationwide home sales will slowly recover and return to their pre-coronavirus levels by the end of 2021. Still, Zillow noted that the pace of recovery highly depends on the scale and success of social-distancing measures, among other factors.

Related: Pending Home Sales Reach Lowest Level Since 2011

3) Housing Supply and Demand Forecast

The impact of the COVID-19 pandemic on home sales is expected to change the real estate supply and demand in the US housing market. On the demand side, the fast increase in unemployment as a result of the coronavirus pandemic and its accompanying stay-at-home orders will limit many Americans’ ability to afford a purchase as big as a home. Experts at Capital Economics also predict that the economic cost we’re paying to contain the virus will weight down the economy in 2021. Based on their data, US home sales are expected to be around 6 million in 2021 instead of the previously projected 6.3 million.

Meanwhile, on the supply side, the number of homes for sale is falling as sellers are pulling their listings from the market. Sellers are either hesitant about allowing strangers to tour their homes or are worried that the lack of demand is placing downward pressure on the sales price they might otherwise receive. Also, home-building activity following the Great Recession didn’t keep up with the demand, creating a significant gap in the marketplace. Consequently, housing market predictions for 2021 according to economists’ expectations are that the low supply would prevent buyers from finding a property that they could afford.

Housing Market Predictions 2021: Experts' Forecast Post COVID-19 (1)

4) Housing Affordability Predictions

Affordability was already an issue for the housing market 2020, even before the coronavirus hit. The housing affordability index determines the affordability of the housing market by comparing the median household income to the median house price. An affordability index of 100 means the average person could afford the average home. An increasing affordability index, however, means more people are priced out of the real estate market. According to the National Association of Realtors, the national housing affordability index was 162.10 in March 2020 compared to 153.40 in March 2019. In other words, homes are less affordable now than a year ago.

Related: How to Easily Find Affordable Houses for Sale for Real Estate Investment

(Video) Experts give 2021 housing market predictions

Of course, we can relate this issue to the coronavirus pandemic and its effect on housing market predictions for 2021. The lockdown caused unemployment to increase as many people lost their jobs. This adds to the millions of households seeing their income drop. Keep in mind the first US housing market forecast which is that home prices will remain steady or drop just a few percentage points. The end result is a significant drop in the average household income while the cost of the average home remains almost unchanged. For a real estate investor, this means that there will be an increasing demand for rental properties when the coronavirus pandemic is over.

If you have a Mashvisor account, use our Property Finder to find lucrative rental properties that you can afford according to your budget and investment criteria!

Is The Housing Market Going to Crash In 2020 or 2021?

Even though the US housing market likely won’t be the cause of the next recession, a downturn in the economy would still have an impact on the real estate market. The overall housing market could enter a recession in under five years, with Zillow predicting that it will start in 2020. People now ask if this will cause a housing market crash. According to economists, the spillover to the housing market will rely upon the length, depth, and severity of the 2020 coronavirus recession. So far, experts are optimistic that we will not see a housing market crash throughout the rest of 2020.

In addition, you should always keep in mind that national real estate trends can vary quite a bit from one city and state to the next. According to US housing market predictions, some parts of the country will feel the effects of a recession worse than others. When it comes to home prices, for example, some markets could sail through the current crisis with a mere slowdown in price appreciation, but others could feel a measurable drop. Thus, even though there won’t be a nationwide housing market crash, local markets might suffer more than others and take longer to recover. This is why you, as a real estate investor, must always remember to analyze your housing market of choice before buying an investment property.

Will Real Estate Conditions Shift to a Buyer’s Market in 2021?

For years, the US housing market was described as a strong seller’s market. But as the COVID-19 pandemic is affecting both sellers and buyers in 2020, the market’s dynamics are shifting. As mentioned, the rate of new home listings entering the market has gone down significantly, adding very little new housing inventory to the national pool of listings. Similarly, there are fewer closed sales due to social distancing measures. Does this mean the real estate market will shift into a buyer’s market in 2021?

According to housing market predictions from Realtor.com, it could. If the real estate market resets and picks back up later in the year, listings and sales will likely increase. As listings start coming to the market, this accumulation of listings will drive up months’ supply figures. In turn, this will temporarily shift us to a buyer’s market. Then, as the rate of buyers catches up to listings, this sales and listings dynamic will start to balance out. However, it remains to be seen where it ends up at the end of the year.

Related: Will There Be a Real Estate Boom Post COVID-19?

(Video) AirBnBust! How Desperate AirBnB Sellers Will Pull The Housing Market Down

What should you do if you’re planning to sell a house during the pandemic? If you absolutely need to sell, expect homes to be slow to sell. You might also have to lower your asking price. But if you can, you may want to wait a few months to see is things will shift from a buyer’s market to a more balanced market. The only exception, however, would be for owners of affordable homes that are in short supply. If this is the case for you, then you’ll have a seller’s market as soon as people are allowed to go back out shopping.

The Bottom Line

Experts point out that it’s still too soon to make reliable housing market predictions for 2021. It all depends on how much longer the nation must deal with the coronavirus pandemic as well as how quickly the economy can recover. However, some analysts say that the real estate market will be a key driver in economic recovery toward the end of the year. We also expect this to be the case seeing that some markets are still great locations for investing in real estate and buying rental property. To stay informed on the latest real estate news, keep reading our coronavirus trends blogs.

If you want to start searching for a rental property for sale, do so with Mashvisor and enjoy 15% off if you sign up now!

Buyers MarketProperty PricesSalesSellers Market

Housing Market Predictions 2021: Experts' Forecast Post COVID-19 (2)

Eman Hamed

Eman is a Content Writer at Mashvisor. With a focus on market reports, she enjoys researching the state of the real estate market in different cities across the US. Eman also writes about trends, forecasts, and tips for beginner investors to gain the confidence and knowledge they need to make wise decisions.

(Video) Housing Outlook 2023: A look at rent prices, mortgages and interest rates

FAQs

Will house prices come down in 2022? ›

The current economic conditions mean that it is growing increasingly likely house prices will start to fall in 2022.

Should I offer below asking price 2022? ›

In general, it's best to offer 4-8% below the asking price on a house, assuming its asking price is close to the fair market value. This will give you some room to negotiate while not insulting the seller with a low-ball offer.

Is now a good time to move house 2022? ›

2022 will remain a strong sellers' market

2021 was described as a 'seller's market', where demand for homes outweighed the supply of properties available. This is expected to continue into 2022, so there's no need to worrying about your current home not selling.

Is now a good time to buy a house Martin Lewis 2022? ›

Martin Lewis has issued a fresh warning to home buyers as rates are expected to rise 6% in 2023. The Money Saving Expert founder has advised that first time buyers should not be buying a house right now unless they are prepared and plan to live in the home for the long term future.

Is it smart to buy a house right now? ›

Based on data, now is a good time to buy a house — and first-time buyers agree. According to Fannie Mae's National Housing Survey, more than 60% of renters would buy a home if their lease ended. Most expect rents to rise sharply in the next 12 months. The housing market may favor Fall home buyers.

Will house prices crash in 2023? ›

Independent economic research consultancy Capital Economics has warned rising interest rates could trigger house prices to go into reverse, suggesting they'll drop by around 5% in 2023 and 2024. While they predict house prices will drop in 2023, they've also suggested price growth will remain strong in 2022.

How do you win a bidding war house in 2022? ›

9 ways to win a bidding war
  1. Find out what the seller wants. ...
  2. Get a preapproval or precommitment for a mortgage. ...
  3. Be flexible with the timing. ...
  4. Offer a large earnest money deposit. ...
  5. Be a cash buyer. ...
  6. Offer concessions to the seller. ...
  7. Offer an appraisal gap guarantee. ...
  8. Write a 'love letter' to the seller.
11 May 2022

Are houses selling for asking price? ›

Homeseller were achieving 80% of asking price at the start of this year, but this has now climbed by 13% to 93%.
...
London property sales see 6% increase in asking price.
Table shows percentage of asking price achived and changeLocationLondon (overall average)
% of asking price – Q1, 202185%
% of asking price – Q2, 202191%
Change (%)6%
35 more columns

Should you pay more for a house than the appraised value? ›

Real estate expert opinion is generally against the idea of paying more than than a property's appraised value. Even if you make up the difference on an under-appraised property, you'll have a property worth less than what you paid.

Should I sell my house now or wait until 2022? ›

Ahead of 2022, many homeowners were able to lock into mortgage rates below 3%, which makes selling any time in the near future far less attractive. Unless other factors are making a move necessary, enjoy the low interest rate you have locked in and continue to build equity in your home.

What are property prices going to do in 2022? ›

What will happen to house prices in the remainder of 2022 and beyond? Experts predict that house price growth will slow during the remainder of the year, with the cost of living crisis and rising mortgage rates likely to affect the number of homes being sold.

Should I sell my flat now 2022? ›

The sustained buyer demand and a shortage of housing inventory fuels the property market. You can take advantage of a higher demand to sell you home at a good price especially where bidding wars are common. Rising mortgage rates also serves as an indication why you should sell your home now.

Should I sell my house now? ›

With continued supply shortages and high buyer demand, now is a good time to sell your home. And with interest rates on the rise, it may be better to sell sooner rather than later — if rates spike much more, some prospective buyers may retreat from home shopping. But consider your reasons for selling carefully.

Are mortgage rates going to come down? ›

The forecast calls for purchase mortgages to drop by 3% next year, while refinance volume is anticipated to decline by 24%. The slowdown in housing activity and higher mortgage rates will cut the pace of home price growth, according to MBA. The forecast projects national home prices to be roughly flat in 2023 and 2024.

Will real estate prices go down? ›

Real Estate Market in the Third Quarter of 2022

And since there's still strong buyer demand and a shortage of homes for sale, prices aren't going to plummet. They're softening a bit when it comes to growth—but they'll still be higher than they were at the start of this year.

Will 2023 be a good time to buy a house? ›

The bottom line on the 2023 housing market

The housing market will be tepid in 2023, with only lukewarm demand and a limited amount of inventory available for sale,” McBride predicts. However, “mortgage rates could pull back meaningfully next year if inflation pressures ease.”

Why You Should Sell Your house in 2022? ›

Home prices are super high

The Federal Housing Finance Agency reports that U.S. home prices were up 18.5% during 2021's third quarter. Chances are, home prices will remain high well into 2022. That gives you, as a seller, a prime opportunity to make a decent chunk of money once you list your property.

Should I buy a house when the market crashes? ›

Is Buying A Home During A Recession Worth It? In general, buying a home during a recession will get you a better deal. The number of foreclosures or owners who have to sell to stay afloat increases, typically leading to more homes available on the market and lower home prices.

How much are house prices likely to drop? ›

It said house prices will have risen 6 per cent by the end of 2022 but that they will fall 5 per cent in 2023 and a further 5 per cent in 2024 as a result of the sudden spike in mortgage rates caused by the government's fiscal plans.

What makes house prices fall? ›

House prices fall where there is a decline in demand and/or excess supply. The main factors that cause a fall in house prices involve: Rising interest rates (making mortgage payments more expensive) Economic recession / high unemployment (reducing demand and causing home repossessions).

How much did house prices drop in 2008? ›

During the 2008 financial crisis, property fell in value by 20% in just 16 months. Repossessions soared, and it was only in May 2014 that the average house price recovered to pre-credit crunch levels.

Do sellers always pick the highest offer? ›

This can happen for a variety of reasons, but the simple answer is “no.” In real estate transactions, the seller can choose the offer they want and there is no obligation to accept the offer with the highest price. In fact, the seller is not obligated to accept any offer.

How do you avoid bidding wars on a house? ›

Consider getting a mortgage in principle before you make an offer on a house. A mortgage in principle shows how much money a lender is happy to loan you to buy a house, proving that you can afford to buy.

How much should you offer in a bidding war? ›

Some real estate professionals suggest offering 1% – 3% more than the asking price to make the offer competitive, while others suggest simply offering a few thousand dollars more than the current highest bid.

How do you make a strong offer on a house? ›

10 Agent Tips For Making A Strong Offer On A House
  1. Check Your Client's Preapproval And Prequalified Status. ...
  2. Make The Best Offer. ...
  3. Encourage Clients To Write A Personal Letter. ...
  4. Be Flexible With The Closing Date. ...
  5. Submit A Clean Offer. ...
  6. Offer To Help With Closing Costs. ...
  7. Offer More Earnest Money. ...
  8. Submit Offers With More Cash.

Should you always offer below asking price? ›

Many people put their first offer in at 5% to 10% below the asking price as a lot of sellers will price their houses above the actual valuation, to make room for negotiations. Don't go in too low or too high for your opening bid. If you make an offer that's way below the asking price, you won't be taken seriously.

How much less can you offer when paying cash for a house? ›

According to new findings published by researchers from the University of California-San Diego, cash buyers paid approximately 12% less than those who used traditional mortgage financing over the past 40 years. Think about it: what would you do if you had the opportunity to save $72,000?

How often do appraisals come in low 2022? ›

How often do home appraisals come in low? Low home appraisals do not occur often. According to Fannie Mae, appraisals come in low less than 8 percent of the time, and many of these low appraisals are renegotiated higher after an appeal, Graham says.

What happens if house doesn't appraise for asking price? ›

When your home appraises for less than its purchase price, there are a few potential options: Seller and buyer renegotiate a new, lower home sale price. Buyer increases the down payment to meet new LTV and down payment minimums. Seller and buyer cancel the home purchase contract.

Will a bank loan more than appraised value? ›

The short answer is yes. Many lenders take market conditions into account when making lending decisions, and in a strong seller's market, they may approve loans for buyers whose offers surpass appraised values, but depending on the loan to value your mortgage terms may need to be adjusted.

What are property prices going to do in 2022? ›

What will happen to house prices in the remainder of 2022 and beyond? Experts predict that house price growth will slow during the remainder of the year, with the cost of living crisis and rising mortgage rates likely to affect the number of homes being sold.

Will UK house prices fall in 2023? ›

The bank now expects house prices to fall by a little more than 7% in 2023, based on the weighted average of its forecasts. On Thursday, the UK's largest mortgage lender, Lloyds Banking Group, predicted an 8% slide in house prices next year.

Will real estate prices go down? ›

Real Estate Market in the Third Quarter of 2022

And since there's still strong buyer demand and a shortage of homes for sale, prices aren't going to plummet. They're softening a bit when it comes to growth—but they'll still be higher than they were at the start of this year.

Will house prices go down in recession? ›

Across all of those recessions, the average house price dip was 5% for each year the economy remained down. In some cases, that drop was huge: In the Great Recession, the average home price dropped by nearly 13%.

Should I sell my house now? ›

With continued supply shortages and high buyer demand, now is a good time to sell your home. And with interest rates on the rise, it may be better to sell sooner rather than later — if rates spike much more, some prospective buyers may retreat from home shopping. But consider your reasons for selling carefully.

Will property rates increase in 2022? ›

NEW DELHI: Residential property prices across the top seven cities--Mumbai Metropolitan Region (MMR), National Capital Region (NCR), Pune, Hyderabad, Chennai, Bengaluru, Kolkata--rose 4-7% between September 2021 and September 2022, according to data from Anarock Property Consultants.

How is the property market at the moment? ›

House sales reached 114,440 in August 2022, increasing 4.4% compared to the previous month, according to HMRC. The figure is also 9.7% higher than the same time last year. The housing market momentum continued in the summer months as employment is buoyant and demand still outweighs supply.

Is 2023 a good year to buy a house? ›

The bottom line on the 2023 housing market

The housing market will be tepid in 2023, with only lukewarm demand and a limited amount of inventory available for sale,” McBride predicts. However, “mortgage rates could pull back meaningfully next year if inflation pressures ease.”

Is it a good time to buy a house UK? ›

Discover The WeekDay

Rising inflation and costs do mean house prices could fall, though it is “unlikely that house prices will crash”. Property site Rightmove says that house prices could fall slightly towards the end of 2022, although it predicts that prices could still be 5% higher than they were at the end of 2021.

What would cause house prices to fall? ›

The main factors that cause a fall in house prices involve: Rising interest rates (making mortgage payments more expensive) Economic recession / high unemployment (reducing demand and causing home repossessions). Fall in bank lending and fall in availability of mortgages (making it difficult to buy).

Where are home prices falling the most? ›

U.S. metro areas where home prices are falling
  • San Jose, CA. –10.7%
  • San Francisco, CA. –8.5%
  • Seattle, WA. –8.2%
  • Denver, CO. –5.8%
  • San Diego, CA. –5.2%
  • Portland, OR. –5.1%
  • Las Vegas, NV. –4.8%
  • Phoenix, AZ. –4.4%
22 Oct 2022

What happens when the housing market crashes? ›

During a housing market crash, the value of a home decreases. You will find sellers that are eager to reduce their asking prices. Sellers may be more motivated to bargain on price or make concessions to buyers.

Will house prices always go up? ›

Home values tend to rise over time, but recessions and other disasters can lead to lower prices. Following slumps, home values can increase in some areas of the country because of strong demand and low supply, while other areas struggle to rebound.

Should I buy a house when the market crashes? ›

Is Buying A Home During A Recession Worth It? In general, buying a home during a recession will get you a better deal. The number of foreclosures or owners who have to sell to stay afloat increases, typically leading to more homes available on the market and lower home prices.

Is it better to have cash or property in a recession? ›

For investors, “cash is king during a recession” sums up the advantages of keeping liquid assets on hand when the economy turns south. From weathering rough markets to going all-in on discounted investments, investors can leverage cash to improve their financial positions.

Are we going into a recession 2022? ›

The U.S. has already experienced two consecutive quarters of negative GDP growth in 2022, which some people consider to be a recession. But others are waiting for the National Bureau of Economic Research to make the final call—and it has yet to do so.

Videos

1. Canada's housing market: CMHC expects recession by end of 2022
(CTV News)
2. What’s the Post-Pandemic Outlook for Housing Markets?
(Bloomberg Markets and Finance)
3. How COVID-19 Has Changed the Housing Market | U.S. Economic Outlook: March 2021
(CoreLogic)
4. Housing Market Prediction 2021 | Zillow Real Estate Forecast
(Zillow)
5. The 2021 Forecast: Markets and Economy POST COVID-19
(California Lawyers Association)
6. Spokane 2022 housing market forecast: Interest rates could gradually increase
(KREM 2 News)
Top Articles
Latest Posts
Article information

Author: Duane Harber

Last Updated: 02/03/2023

Views: 6218

Rating: 4 / 5 (71 voted)

Reviews: 86% of readers found this page helpful

Author information

Name: Duane Harber

Birthday: 1999-10-17

Address: Apt. 404 9899 Magnolia Roads, Port Royceville, ID 78186

Phone: +186911129794335

Job: Human Hospitality Planner

Hobby: Listening to music, Orienteering, Knapping, Dance, Mountain biking, Fishing, Pottery

Introduction: My name is Duane Harber, I am a modern, clever, handsome, fair, agreeable, inexpensive, beautiful person who loves writing and wants to share my knowledge and understanding with you.