US Annual Home Sales Projected to Soar by 10% in 2021, Home Ownership Rate to Reach 70%

As the US economy recovers from the 2020 recession, the housing market is expected to boom this year. According to the research data analyzed and published by Comprar Acciones, 2021 could see the most robust housing market since 2006.

Redfin predicts that in 2021, growth in annual home sales will soar to 10%, up from 5% in 2020. New listings, which declined 3% in 2020, are set to rise by more than 5% in 2021. 

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In 2020, the sales volume for existing houses reached 5.7 million, marking a 5.9% increase from 2019 according to Zillow Economic Research. That reversed a multi-year period of stagnation and was remarkable given the prevailing circumstances. But the performance will be pale in comparison to 2021. Sales volumes will remain elevated throughout the year, to finish 2021 at 6.9 million units, up by 21.9% year-over-year (YoY). That will be the highest sales volume since 2005 and will represent the biggest one-year increase in sales since the early 80’s.

The key factor driving growth in the industry is the record low mortgage rates, which will remain low as a result of a slow economic recovery worldwide. Based on Redfin’s estimates, the 30-year-fixed mortgage rate will rise gradually from 2.7% to reach 3%.

Courtesy of the increase in listings and rising mortgage rates, price growth will slow down from 6% in 2020 to less than 5% in 2021. Moreover, the number of new homes constructed in 2021 will be the highest in 15 years. Due to high construction costs, builders have not built enough homes to meet the demand for at least a decade.

14.5 Million People to Relocate Cross-County in 2021

According to Norada Real Estate, the number of homes for sales tumbled by around 30% in 2020. That left the market with almost twice the demand and only two-thirds of supply.

However, in the period between September and November 2020, building permits soared by 21% year-over-year (YoY). Home builders did not have to compete with office builders for material in 2020.

With low interest rates, borrowing for projects was much easier. 2021 will provide even more favorable conditions as more people shift to rural and suburban areas, where construction will be profitable.

As residents of the US settle into post-pandemic lives, the number of people relocating across counties will surpass 14.5 million in 2021 per according to the United States Census Bureau. In comparison to 2018 when 11.4 million people moved across county lines, that will be a 25% increase.

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The only other time when cross-county migration was that high was in 2004, with 15.3 million Americans moving. Thanks to the predominant trend of remote work, there will be a high number of people moving away from cities to more affordable areas.

With the normalization of work-from-home trends, there will be a domino effect increasing home ownership. By the end of 2021, the rate of home ownership is projected to rise to 70%. That will be the first time since 2005 when the rate will be above 69%. The trend in remote work will also direct demand away from the multifamily sector and into single-family housing in 2021. According to SP Global, the total single-family houses is projected to surpass one million units during the year. By the end of 2020, it had increased by 7% YoY, hitting 1.34 million as multifamily houses tumbled by 13.6% to 331,000 units.

Most 2021 buyers will make an offer without seeing the home in person. The trend spiked in spring 2020 when 45% of homebuyers reported making offers on homes sight unseen. That was a significant increase over 2019’s 28% and the highest share since 2015.

90-Day Mortgage Default Activity Shot up by 250% in 2020

Based on data from Black Knight, 2020 ended with an increase of 1.54 million delinquent and 1.7 million seriously delinquent mortgages compared to 2019.

However, the national delinquency rate improved slightly in December 2020. It declined to 6.08%, the lowest share since April 2020. Though this was 78.93% higher than December 2019, it was 3.9% lower than the rate seen in November 2020. Serious delinquencies also fell from 2.19 million in November to 2.15 million in December.

Despite these improvements though, 90-day default activity for the whole of 2020 shot up by 250%, equivalent to 2.6 million.

Notably, foreclosure sales sank by 67% from 2019. There was a total of 40,000 foreclosure sales during the year, marking a decline of over 70% YoY. The reduction resulted from forbearance plans and moratoriums which protected struggling homeowners from foreclosure. The monthly prepayment rate, however, rose by 12% in December 2020 alone and ended the year 112% higher than December 2019.