Since the pandemic caused many employers to shift employees to remote work – some indefinitely – homeowners have left cramped spaces in large cities and retreated to more suburban and rural areas with bigger homes at a lower cost.
At the National Association of Realtors Real Estate Forecast Summit on Thursday, NAR’S Chief Economist Lawrence Yun explained that although many are working remotely now, he doesn’t expect that change to be permanent.
Yun unveiled the consensus forecast from NAR Thursday during the summit, in which a group of experts said 21% of workers are working from home now. That’s based on employees who are working from home 100% of the time, Yun said. By 2021, that number will decrease to 18%, then continue to decrease in 2022 to 12%.
“I think the flexible schedule, two days a week, three days a week, come into the office, that is unknown, we will see how everything plays out,” Yun said. “[In 2019] only 6% worked from home.”
After spring home-buying season was paused in March due to the pandemic, pent-up demand mixed with the work-from-home lifestyle drove real estate sales through the rest of the year.
In October, homebuyer traffic increased 32% year over year, while pending contracts increased 20% year over year. Yun added that the winter months could be some of the best for home sales.
“…When the pandemic began, [there was a] tremendous amount of uncertainty, a large scare, knowing that we encountered the foreclosure crisis 10 years ago,” Yun said. “So what was going to happen with so many people losing jobs? And to our surprise, the housing market not only recovered and then some, roaring past the pre-pandemic activity levels.”
The forecast also predicts that housing starts will slowly tick up as the new year approaches. This year, housing starts were at 1.53 million, but the forecast posits that 2021 will see a slight dip to 1.5 million and rebound in 2022 with 1.59 million housing starts.
Annual median home prices are expected to increase by 8% in 2021, then by 2022 will increase by 5.5%. Mortgage rates are expected to increase too – the average annual 30-year fixed mortgage rates will be 3% and 3.25% for 2021 and 2022, respectively.
NAR said the following markets, which showed resilience during COVID-19, are expected to thrive in a post-pandemic 2021 and 2022:
- Atlanta-Sandy Springs-Alpharetta, Georgia
- Boise City, Idaho
- Charleston-North Charleston, South Carolina
- Dallas-Fort Worth-Arlington, Texas
- Des Moines-West Des Moines, Iowa
- Indianapolis-Carmel-Anderson, Indiana
- Madison, Wisconsin
- Phoenix-Mesa-Chandler, Arizona
- Provo-Orem, Utah
- Spokane-Spokane Valley, Washington
In addition, the group of experts predicted that the annual unemployment rate will be at 6.2% next year and will decline to 5% in 2022. Yun said that unemployment is making much better progress than what many economists anticipated earlier this year.
“Thankfully, at least the unemployment rate is going down, but compared to the pre-pandemic levels, it is not acceptable,” Yun said. “We still have large work to do regarding the broader economy”