This may be one of the greatest winters for home sale activity, said Lawrence Yun, the National Association of Realtors®’ chief economist, in a recent presentation.
“Winter-to-winter comparison, this should be one of the best,” he said. “Pending contracts are higher. Mortgage applications are up roughly 20%. There are plenty of buyers in the pipeline.”
Yun said the percentage of income dedicated for mortgage payment is currently “very manageable” for consumers, however, it is beginning to rise, despite very low mortgage rates.
“Home prices are out of control,” said Yun. “Home prices are rising much, much faster than income growth. It is critical that the mortgage rate remains stable. Some affordable changes have been alleviated by falling mortgage rates.”
According to the U.S. Census, homeownership rate is up, although Yun noted there was a change in the way the surveys were conducted due to the pandemic, so results may be impacted. However, there is a higher homeownership across all ethnicities, especially Black and Hispanic Americans, he said.
“Homeownership rates will be challenged going forward because we simply do not have the supply,” said Yun. “Typically, we have a six-month supply in normal times. Right now, it’s hitting an all-time low of right under three months. There are simply not enough homes.”
Add in multiple offers and home prices quickly rising, Yun said this is limiting renters from becoming buyers. “This is concerning,” he added. ” We need to boost the housing supply.”
Yun also said with many people working from home, they have a strong desire to move. Apartment rental vacancy rates are rising in cities, but dropping in suburbs. He also noted there is a “major collapse” in office leasing activity.
However, Yun predicts 2021 will be a better year, as mortgage rates should remain stable and the housing market should still be strong. He forecasted new-home sales to increase 21%, while existing home sales will see a 9% jump.
“I think the working-from-home demand for larger sized homes will continue,” said Yun. “Prices are in no danger of decline.”