This is the fourth installment of our economist Q&A series, as we work to answer the top 2021 housing market questions. Every Tuesday in December, HousingWire interviewed a top economist in the HW+ Slack channel. The 2021 housing market forecasts have focused on everything from home prices to mortgage rates.
HW: You start your commentary with a bold prediction: The 2021 housing market will be stronger than 2020. What is one of the greatest reasons for this forecast?
Jeff Tucker: Great question to kick it off! We have been keeping a close eye on the decline in active inventory, which I think is the most reliable leading indicator, and its movement this year has been nothing short of jaw-dropping. By Zillow’s count, there are at least 1/3 fewer active listings now than this time last year, with even bigger shortfalls in many metros and submarkets. I can give a quick preview of our upcoming breakdown of suburban markets in particular, where we are approaching 50% year-over-year declines in inventory.
That suggests a huge shortfall of supply relative to demand. It took months to dig this inventory hole, so even if the net flow of active listings turns around, it would take months to dig our way out again. In the meantime, buyers are competing over an incredibly small pool of options, leading to multiple-offer situations and very quick sales, in a vicious cycle of rising prices (virtuous for home sellers, of course, unless they’re trying to trade up!)
HW+ member: That is a massively bullish forecast for EHS in ’21. What’s the basis for it?
Jeff Tucker: Our forecast is 6.9 million homes for 2021. As a starting point, that was basically the same annual number as the October 2020 SAAR pace of sales, and obviously a little higher than the November SAAR numbers that NAR shared today. Our optimism to maintain or expand this fall’s pace comes from the possibility of more sellers coming out of the woodwork next year, and the evidence of a lot of pent-up demand on the buyers’ side.