The markets have been churning at a steady pace from late summer into early fall, but is this coronavirus recovery continuing into the winter and beyond? According to Zillow®’s recent Home Price Expectations Survey, economists expect strong home prices to continue through at least 2021. After that, however, there’s too much economic uncertainty to say for sure what will happen.
According to the report, economists are predicting a 3.7 percent increase in home prices this year—higher than what was predicted during the first quarter of 2020 (3.3 percent). For 2021, there’s a 2.7 percent average forecasted average growth.
“In many ways, the pandemic has helped supercharge a pre-existing housing supply shortage that has struggled to keep up with strong demand,” said Zillow economist Treh Manhertz. “Many of those fortunate enough to have kept their jobs are looking to take advantage of low mortgage rates by jumping into the market, and they’re finding competition to be fierce with inventory as limited as ever. The longer-term path for prices will depend largely on the course of inventory, including whether homeowner finances are stable enough to avoid a wave of distressed sales when forbearance terms expire and at what level builders, who are reporting sky-high confidence, can bring homes to market.”
“In contrast to the debate concerning the contours and sustainability of the U.S economic recovery, these survey data reveal a definitive and remarkably sharp V-shape in U.S. home price expectations,” said Terry Loebs, founder of Pulsenomics. “In a matter of a few months, the pandemic has turbo-charged what had been relatively limited acceptance of remote work, amplified the value of larger living spaces, and ushered in a new era of monetary accommodation by The Fed. With these fundamental forces stoking demand for homeownership amidst stubborn supply constraints, it’s hard to imagine home price expectations returning to the lows of last quarter any time soon.”
Beyond next year, economists predict home price growth to be 2.7 percent for 2022, 3 percent for 2023 and 3.3 percent in 2024. These forecasts are down from last quarter (2.9 percent, 3.3. percent and 3.6 percent, respectively.)
It’s all reliant on how the economy fares in the coming years. In terms of unemployment, experts say there is a 44 percent probability that the U.S. will return to 3.5 percent unemployment—the level recorded in February—by the end of the decade. Seventy-one percent believe that 2025 or later is the soonest we’ll be able to match that February level.
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