This year has been full of surprises, but the biggest might be how exceptional the housing market is performing, National Association of Realtors Chief Economist Lawrence Yun said on Tuesday.
In a panel at the NAR 2020 Realtors Conference and Expo, Yun discussed what a Biden presidency could mean for the housing market, the future of mortgage rates and how to remedy low housing inventory.
One pandemic trend in the housing market has been the increase of homeowners relocating to the suburbs and vacation towns. Now that work-from-home policies have been implemented for many, employees don’t need to live in cities anymore. In fact, Yun said that working from home has made office occupancies decrease by nearly 41%.
While working from home has become widespread during the pandemic, Yun said that he believes this trend will continue once a vaccine has been distributed.
“…If one does not have to commute every single day, then people may say ‘well I don’t mind living further out from the downtown areas’,” Yun said.
Another pandemic trend is homeowners are relocating to bigger, more expensive homes. Not only that, but more homes are becoming multi-generational.
For many, the homeownership journey logically begins by trying to figure out how much house you can afford.
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“The rise in prices partly reflects that people are buying larger size homes, so prices are rising,” Yun said. “But if you look at the constant quality price index, like Case Shiller or FHFA…it is also beginning to show slight acceleration. And I anticipate as more data becomes available, it will show even greater acceleration based on the trend of the multiple offers.”
Housing inventory has remained lower than ever this year. Yun said one thing that could encourage builders to create more inventory would be removing tariffs and bringing down the price of lumber.
Going forward, Yun said that the homeownership rate could be challenged because “we simply don’t have enough supply.”
“Not enough homes for sale means multiple offers, prices rising too fast, and it may limit some of the renters from becoming owners,” Yun said.
Mortgage rates have also been lower than ever this year, helping the housing market. Yun predicts that in 2021, mortgage rates will stay roughly the same.
“It was two days ago when Freddie Mac’s CEO said he is resigning, and I think that’s based on the decision that Joe Biden will be the incoming president, because he may have perceived that Fannie and Freddie perhaps could be privatized under President Trump,” Yun said.
“But now under Joe Biden, he will be widening of the government guarantee, which means that mortgage rates should remain very low without the privatization because we want to ensure that Fannie and Freddie do not make a mistake of chasing after subprime lending as what happened 10 years ago, but just serve the role of homeownership to assure that government guarantee provides the lowest interest rates for credible homebuyers.”
Over the summer, housing markets remained busy due to pent up demand from spring-time homebuyers waiting out the pandemic. Yun said that winter should remain busy as well, and even into spring 2021.
“Pending contracts are up strongly, implying that this winter may be one of the best winters for home sales activity,” Yun said. “I mean, it’s not going to be spring or summer, so one has to compare this winter with other past winters. And by winter to winter comparison, this year could be one of the best based on the breakout of the pending contracts at a much higher level.”