Economists optimistic about where the future of the housing market

It’s a question that is increasingly being asked. Is there a bubble in the housing market? Is the market on the verge of some catastrophic crisis? According to a recent survey of top economists and real estate experts, the answer is no. In fact, there is much reason to feel optimistic about the future.

A survey of 42 economists and analysts specializing in residential real estate was published by the Urban Land Institute last week. Drawing on responses given across April and May, the survey addresses the pressing question of where the real estate market is headed. The answer is largely hopeful.

According to the economists, the upward trend in housing starts seen in 2020 will continue into 2022, before flattening out in 2023. Last year, there were 990,500 new home starts. The survey anticipates this number to rise to 1.1 million in 2021, and then 1.2 million in the following year.

If this projection is correct, it will go a long way towards alleviating the country’s longstanding inventory problem. 2020 was the first year since 2007 to surpass the 20 year average of housing starts, a sign that the building sector may soon back on pace with where it was prior to the Great Recession.

With this projected rise in building, the economists in the survey also anticipate a gradual cooling down of the heated housing market. Home prices rose by 11.4% in 2020, the greatest yearly price increase in decades. The survey predicts that prices will rise in 2021 by a still significant 8.1%. After that, prices will taper off to a 5% increase in 2022 and 4% in 2023.

The coming years should also see a slight drop in vacancy rates in apartments. Vacancy peaked in recent years in 2009 at 7.2%, but the numbers have been a lot lower recently. Even in 2020, vacancy rose only slightly from 4.1 to 4.5% still well below the 20 year average of 5.33%. The survey predicts that this will be down to 4.18% by 2023.

The survey is optimistic overall, predicting that as such metrics as housing starts improve, the market will cool down. While the current state of frenzied bidding wars and increasing prices will continue in the short term, the market overall seems healthy and stabilizing.

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