The U.S. housing market has undergone a meteoric rise during the coronavirus pandemic, fueled by record-low mortgage rates and a wave of migration made possible by remote work. Almost two-thirds (60%) of people expect to continue working from home at least part time after the pandemic, according to an April survey of Redfin.com visitors who have moved to a different metro area in the last year. These factors—alongside an acute housing shortage—helped March become the hottest month in housing history, with home values, price growth and selling speed all hitting new heights.
In short, the combination of rising demand (home sales) and surging home prices is fueling the increase. While home prices could grow more slowly if mortgage rates rise, that would result in a more balanced housing market, which could actually lead to more home sales, according to Redfin Chief Economist Daryl Fairweather.
“We expect 2021 to be an even more active year for the housing market than 2020 because homebuyers have a better sense of what the future looks like,” said Fairweather. “Employers are providing clarity on permanent remote-work policies, the economy is recovering and mortgage rates remain low. All of these factors mean that we’ll likely see even more buyers enter the market this year and in 2022.”
The South is expected to lead the way with $1.09 trillion of home sales forecast for 2021, followed by the West with $696.3 billion, the Midwest with $422.6 billion and the Northeast with $322.8 billion.
The South has consistently held the top spot, but has inched further ahead in recent years. This is likely because it has more vacant land on which to build, and has attracted scores of out-of-town homebuyers who are in search of affordability and space, Fairweather said. Seven of the 10 U.S. metros with the biggest net inflows in the first quarter were in the South. Net inflow is a measure of how many more Redfin.com home searchers looked to move into a metro than leave.
“A lot of wealth from the coasts is shifting South,” said Fairweather. “Affluent homebuyers from New York and San Francisco have moved to places like Florida and Texas during the pandemic, which has fueled home sales and driven up prices in those areas.”
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