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Market Predictions

Here are the latest housing market predictions for 2021 & 2022. It has been roughly one year when the pandemic put the housing market on hold for several months last spring. But the real estate market bounced back quickly and has been booming since then. More existing homes were sold in 2020 than in any year since 2006. Many market watchers have been wanting to know how long will this housing boom last? Well, so far, the housing market continues to be sizzling hot resulting in higher home prices and quick-selling homes.

Housing demand remained strong in the first quarter of 2021 but the lack of supply and rise in mortgage rates will likely continue to hold back potential home sales. That’s one reason why Fannie Mae has decreased their housing sales forecast for 2021. They expect a slowdown in the monthly pace of both existing and new sales later in the year.

However, on an annual basis, the total home sales in 2021 are still predicted to be 6.2 percent higher than last year. Even as mortgage rates drift upward, home purchase demand remains robust. Mortgage rates are expected to remain near borrower-friendly levels and will help maintain strong housing demand in 2021.

Hence, the supply-demand dynamics will continue to push home prices up by 8 percent in 2021 – up from the previously predicted rate of 4.2 percent (FHFA Home Price Index). Another interesting thing is that this higher home price forecast more than diminishes the modestly higher interest rate forecast. Therefore, the mortgage originations are also expected to tick up by 14.5 percent year-over-year in 2021.

Fannie Mae predicts overall single-family mortgage market originations in 2021 and 2022 to total $4.0 trillion and $3.0 trillion, up from $3.9 trillion and $2.9 trillion, respectively. However, according to another mortgage giant, Freddie Mac, the total originations will decline to $3.5 trillion in 2021 as higher mortgage rates have the potential to soften the robust demand the housing market has been experiencing.

Freddie Mac predicts home prices will rise by 6.6 percent in 2021, slowing to 4.4 percent in 2022, while it expects home sales to reach 7.1 million in 2021, and then declining to 6.7 million homes in 2022.

Even with rising mortgage rates and higher prices, the housing market should remain strong due to very tight inventories and increasing demand as more millennials are projected to buy houses this year. Now millennials make up the largest share of homebuyers in the US, according to a 2020 survey from the NAR. According to a new study by Realtor.com, buying is more cost-efficient than renting in a growing number of the largest cities in the country. This is encouraging news for the millions of millennials who are approaching peak homebuying age.