SEATTLE, Dec. 21, 2020 /PRNewswire/ -- The for-sale
housing market showed incredible strength in 2020, and Zillow®
predicts 2021 will be even stronger.
Demand continues to grow, and is expected to surge in the cities
as economies reopen. Zillow forecasts annual home sales growth will
be the highest in nearly 40 years as life and financial certainty
brings more sellers into the market to meet the heavy demand and
technology allows for faster connections with interested buyers.
Home prices, mortgage rates and rents will rise, bringing
affordability challenges that must be faced.
Zillow predicts 2021 will be a year unlike any other as the
housing market responds to the challenges and changing preferences
that this year brought.
Zillow's housing predictions for 2021:
Demand for city living will surge in 2021, but don't call it
a comeback
Demand for urban housing largely kept pace with
the suburbs in 2020. But rent prices in urban areas softened
compared to their suburban counterparts in the spring and summer as
a shift in housing needs and the spike in service-sector
unemployment left their mark. While it's not quite right to
call it a comeback, Zillow expects demand for city living to surge
in 2021.
Some of the nearly 3 million adults who moved in with
parents or grandparents in the spring have already started to move
back out while taking advantage of an increase in rent concessions.
With COVID-19 vaccine distribution underway, Zillow expects many of
those who may have left cities temporarily during the pandemic are
likely to return as local economies begin to open up, and a new
class of young adults will be drawn to cities as they finish school
and enter the job market. Urban rental demand is likely to be
boosted by the relatively soft price growth this year, easing
affordability challenges, at least temporarily.
The next home shopping season will be the hottest in recent
memory ...
Zillow expects a perfect storm of market
conditions to create the hottest spring shopping season in recent
memory, with sales happening quickly and often above list price.
It's likely COVID-19 vaccine distribution will be well underway in
the U.S. by the spring, and local economies and schools should be
in the process of opening back up. Many will also have more
certainty about whether their jobs will be performed remotely in
the long term, adding buyers to the market who had been waiting for
that to be settled. Add in expectations for mortgage rates to rise
later in the year, and we could see a buyer frenzy as they look to
lock in rates as low as possible.
… and it could be the last of its kind
Springtime has
historically been the best time to list a home for sale, but homes
have continued to sell quickly through the fall and into the winter
this year in what could be the end of the typical seasonal trend.
The increased adoption of real estate technology has given
home buyers more tools to shop from the comfort of their home,
which can be done just as easily during the warmer spring and
summer months as it can in the dead of winter. That's likely to
lessen the traditional seasonality of home shopping as it reduces
the impact inclement weather can have on things like in-person
showings and open houses.
Home sales growth will be biggest since the '80s
2020
has been a remarkably strong year for the housing market, with
sales on pace to grow 6% from 2019 despite essentially pressing
'pause' for a few weeks in the heart of the spring shopping season.
Zillow expects that mark will be shattered next year, forecasting
21.9% annual growth for a total of 6.9 million homes sold. That
would be the biggest annual sales growth since
1983i.
The optimistic outlook is due largely to the enduring strength
of the market today, even through what is typically a slower season
for home sales, and demographic factors that indicate demand
will remain strong for years to come. Plus, about a third of
homeowners considering selling in the next three years cited life
and financial uncertainty as reasons they weren't selling this
fall. The COVID-19 vaccine rollout and expected subsequent economic
recovery should pull many off the sidelines, adding more inventory
to meet the heavy demand for homes and thus creating more
transactions.
Moving will be a digital-first experience
Zillow
predicts increased adoption of new and existing technologies during
the pandemic will make a digital-first experience the new standard
for real estate in 2021 and beyond, helping to increase the pace of
transactions. These innovations can connect sellers with interested
buyers more quickly, keeping inventory from stockpiling to the same
degree it has in the past.
Take the home shopping experience: Innovations like 3D
Home tours paired with interactive floor plans and virtual
tours are allowing shoppers to winnow down their options without
leaving their couch -- requests for virtual tours tripled when
stay-at-home orders began this spring. When it comes time to tour a
home in person, self-tour technology allows shoppers to tour a
vacant Zillow-owned home on their own schedule -- no more waiting
for the weekend to visit open houses. And nearly two-thirds of
Zillow Offers home purchases are closed digitally with a remote
notary, one more convenience over the traditional home buying
process.
Renters are also expected to use pandemic-accelerated technology
to search, find, apply for, and lease a home all digitally in a
safer, easier, end-to-end online transaction. Nearly half (46%) of
renters agree that they wish more listings offered virtual
toursii -- since March, multifamily rental listings with
a Zillow 3D Home tour have attracted 18% more visitors than those
without on Zillowiii -- and 46% of renters surveyed
would prefer to sign a lease onlineii.
A Zillow surveyiv finds a vast majority of Zillow
Premier Agents (72%) expect to continue using these virtual tools
after the current coronavirus outbreak ends. And the pandemic
prompted 43% of people in a Zillow surveyv to say they
were more likely to sell a home entirely virtually, making it
likely selling will increasingly move online with high-tech options
like Zillow Offers.
Addressing housing vulnerability will be a top priority as
rent prices rise
The expected surge in demand for rentals,
which are more common near city centers, is expected to bring big
price increases and fewer concessions from landlords. That will put
many renters in a tenuous financial position after they were hit
hard by pandemic-related income loss.
The rental market softened in 2020, with rents about flat
nationally. In large metropolitan areas like New York, Boston and San
Francisco, rents dropped for the first time in recent
memory. Still, given the impact of shutdowns and layoffs on renter
households, government assistance proved vital in
keeping many afloat financially. Moody's Analytics
estimates nearly 12 million renters will owe an average of
$5,850 in back rent by January 2021, shining a spotlight on the need for
eviction protections or increased cash flow for renter households,
whether in the form of employment income or federal stimulus
payments to avoid a painful wave of evictions.
Buyers will have a harder time affording homes, especially
their first one
Mortgage payments have become more
affordable for homeowners over the past two years thanks to
ultra-low mortgage rates. Zillow expects rapid price growth and
slightly higher mortgage rates to reverse that trend in 2021, so
buyers contemplating a move may consider doing so sooner rather
than later.
Given the expected volume of sales, hopes for an economic
recovery as the COVID-19 vaccine rolls out, and the expectations
for demand to continue to outpace supply, Zillow forecasts annual
home value growth to reach 10.3% in November
2021 -- the highest since 2006. Mortgage rates, which hit
record lows in 2020, are expected to rise. Rates are likely to
remain low by historical standards and not rise enough to
meaningfully limit demand, but even a small increase would affect
buyers' monthly payments.
Combined, that will make homes harder to afford, especially for
first-time buyers who don't have access to funds from the sale of
their current home.
About Zillow Group
Zillow Group, Inc.
(NASDAQ: Z and ZG) is reimagining real estate to make it easier to
unlock life's next chapter.
As the most-visited real estate website in the U.S., Zillow® and
its affiliates offer customers an on-demand experience for selling,
buying, renting or financing with transparency and nearly seamless
end-to-end service. Zillow Offers® buys and sells homes directly in
dozens of markets across the country, allowing sellers control over
their timeline. Zillow Home Loans™, our affiliate lender, provides
our customers with an easy option to get pre-approved and secure
financing for their next home purchase. Zillow recently launched
Zillow Homes, Inc., a licensed brokerage entity, to streamline
Zillow Offers transactions.
Zillow Group's affiliates and subsidiaries include Zillow®,
Zillow Offers®, Zillow Premier Agent®, Zillow Home Loans™, Zillow
Closing Services™, Zillow Homes, Inc., Trulia®, Out East®,
StreetEasy® and HotPads®. Zillow Home Loans, LLC is an Equal
Housing Lender, NMLS #10287 (www.nmlsconsumeraccess.org).
i
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United States
Department of Housing and Urban Development, Office of Policy
Development and Research;
https://www.huduser.gov/portal/ushmc/hd_home_sales.html
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ii
|
Zillow Consumer
Housing Trends Report, 2020
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iii
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Zillow Internal
Report, September 2020
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iv
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These results reflect
the responses provided by a random sample drawn from Zillow Group's
Premier Agent Research Panel. While selection from the
existing panel was random, membership in the panel is optional, and
limited to current and former Zillow Agents. These results
may not accurately reflect the entire population of Zillow agents
nor real estate professionals as a whole.
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v
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Data was collected by
ZillowGroup Population Science from a survey of 2,600 U.S. adults
recruited and interviewed between May 11th, 2020 and May 15th,
2020. Respondents were recruited from multiple general population
internet respondent panels of U.S. adults from the contiguous
United States. To promote the representativeness of the estimates,
the sample data was weighted to align with key U.S. Census
demographic benchmarks observed in the target
population.
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SOURCE Zillow