If you’re an existing homeowner, get excited, very excited.
A new forecast from Zillow says home prices are going to rise 10.3% from this November until November 2021.
That’s on top of the already stellar growth realized since around 2012, when home prices seemed to bottom and begin their meteoric and historic ascent.
Those fortunate to have purchased a home around that time are sitting really pretty, especially since they probably also have a fixed-rate mortgage in the 2-3% range.
This super bullish housing forecast is also good news for prospective home buyers, as it shows there’s still room for home prices to move higher, even if you didn’t get in early.
The caveat is that it has become increasingly difficult to win a bid on a quality property.
2021 Home Price Growth to Be Highest Since 2006
- Zillow economists are forecasting a 10.3% rise in home prices from November 2020 to November 2021
- This would be the best gain for U.S. property values in nearly 15 years
- Home price appreciation already hit records for both monthly and quarterly gains recently
- The year 2021 is expected to start white-hot with a 3.6% gain by the end of February
Per Zillow, the typical home value, known as the Zillow Home Value Index (ZHVI) increased 1.1% from October to November to $263,351.
They refer to the ZHVI as “a smoothed, seasonally adjusted measure of the typical home value and market changes across a given region and housing type,” which generally reflects properties in the 35th to 65th percentile range (mid-market).
Anyway, the ZHVI has also risen 3% over the past three months, with both the monthly and quarterly gains the largest on record going all the way back to 1996.
This aggressive appreciation has home prices slated to chalk double-digit gains by next November, with Zillow economists forecasting a further 3.6% in the three months ending in February 2021, and 10.3% from November 2020 to November 2021.
That would push the typical home price in the United States to around $290,000, with $300,000 likely just around the corner in 2022.
For comparison sake, home values increased 7.5% since last year, perhaps slowed a bit by the COVID-19 pandemic when things came to a halt in spring.
What Will Drive Home Price Growth in 2021?
- Continued low mortgage rates and limited housing inventory will be the theme
- A new wave of Millennial and Gen-Z home buyers will also increase demand
- And the hope of a COVID-19 vaccine should also fuel optimism for those sitting on the fence
- All of these things will make the year 2021 yet another seller’s market
There are a number of things working in favor of even higher home prices in 2021, some of which are new and some of which are old.
As for the familiar stuff, it’s the continued availability of record low mortgage rates, which keep affordability in check despite ever-higher asking prices.
And 2021 mortgage rate predictions look similarly solid for those wondering if they’ll stick around.
Another ongoing issue that has pushed home prices higher has been limited housing inventory, which remains historically low with just a couple months of supply.
An emerging trend that has been known for a few years is the wave of prospective home buyers coming of age.
The typical first-time home buyer age is 34 years old, and there are about 45 million individuals who will celebrate that birthday over the next decade.
Collectively, we’ve got ultra-low mortgage rates, super limited inventory, and a growing number of potential home buyers.
It doesn’t take much effort to figure out what happens to home prices.
Sprinkle in a COVID-19 vaccine and you’ve got even more optimism, and perhaps more urgency for young folks to get serious and start families.
Ironically, the pandemic may accelerate a lot of plans as opposed to slow them down as people focus on what matters, not the trivial stuff.
Read more: 2021 Mortgage and Housing Market Predictions