2021 Economic Forecast: Housing demand will remain robust amidst journey to economic recovery
The housing market in the Greater Seattle Area is continuing to see a rise in demand and home prices even as our economy is still recovering from COVID-19 impacts that peaked in April.
This trend is expected to continue into 2021 according to Windermere Chief Economist Matthew Gardner’s 2021 economic forecast at the October 6 virtual Get the Edge on 2021. This was the fifth annual economic forecast hosted by the Seattle King County REALTORS® Young Professionals Network and it featured a presentation by Matthew on 2020 housing market conditions from COVID-19 and his forecasts for 2021.
King County Housing Market
Supply and Demand
The weekly average mortgage rates are at an all-time low (2.81% 30-years fixed, 2.32% 15 years fixed as of October). Millennials continue to be busy in Seattle as they made up for 58% of homebuyers so far this year. There are more individuals migrating into our state than moving out largely due to the attractive job market and the technology space in Seattle and the eastside.
New Home Sales
Although new home construction supply is not growing, its sales remain strong and their sale prices have picked back up. New construction permit activity is lagging due to expensive land prices and challenging regulatory fees. Builders are starting to adapt to meet demand by adjusting their products (e.g., smaller homes) and locations (e.g., building in the South end).
Overall sales activity for single-family resale homes has increased despite low supply and home prices having more than doubled in eight years. 2020 sales are expected to exceed 2019 but are still being limited by supply.
Slides reproduced with permission from Matthew Gardner, Windermere Real Estate
King County Housing Forecast by Matthew Gardner
- Some homeowners will head to cheaper markets.
- More renters will turn into buyers as more people who can work remotely can relocate further from work for cheaper homes.
- Price growth has to slow – “advising your clients will be key next year”.
- New and existing condos are troubling.
- First-time buyer demand will remain robust if they can afford it.
COVID-19 Impacts on Economy
New waves of COVID-19 cases across the nation are making it harder for the economy to recover. COVID-19 related job losses were of historic proportions – the nation has not seen the unemployment rate just above 14% in April since the Great Depression. The U.S. is 10.1 million jobs shy of where the nation was in February of this year. While jobless claims remain elevated with the unemployment rate at 6.9% in October, rates will continue to trend lower to below 6%.
Matthew indicated that while “job growth in Q3 should have been stronger,” jobs are returning in all markets and there were a decent amount of jobs added back in October. Metro unemployment rates have also been lowering since April. Job recovery is “bifurcated” because while we are seeing some improvement on job growth, bigger sectors such as leisure/hospitality and retail trade are not expected to reach a big recovery until next year.
U.S. Economic Forecast by Matthew Gardner
- Not all jobs lost will return – furloughs turning into permanent layoffs and many will have to retrain.
- Income growth will be modest; 2021 will show some “real” growth, but election weighs large.
- Significant weight given to U.S. getting vaccine or inoculation this winter.
Regional Economic Forecast by Matthew Gardner
- Uncertainty persists as COVID-19 cases across Washington state remain elevated.
- Jobs will slowly recover through the balance of the year; Washington state can see a +3.6% in employment in 2021.
- Some local legislative initiatives are problematic.
- Regionally, our diverse economy will be beneficial; setbacks will persist (e.g., Boeing), but 2021 will see the economy grow.
Amazon’s HQ 2.5 in Bellevue will generate greater commercial activity in the eastside. Bellevue’s Development pipeline will include more hotels, offices, and apartments.