Double-digit home-value growth is expected to end post-pandemic as the economy rebounds, and condominium prices will likely grow faster than single-family home prices, according to a report by Redfin Chief Economist Daryl Fairweather.
The report forecasts that home values will still grow as the economy recovers, but at a slower place than the last year, as mortgage rates temper demand. Home values will rise about 5 percent per year, Fairweather said, more in line with the growth of the overall economy.
“Some people will be eager to buy a home because they will feel more confident in their own economic prospects once the economy recovers,” Fairweather said in the report. “But some people will look at how expensive homes have become and hold off.”
She expects mortgage rates to increase to pre-pandemic levels of around 3.5 percent for a 30-year fixed rate mortgage, making borrowing to buy a home more expensive than it is now.
“Since the economy is already doing better than many economists anticipated, there is a small risk that the trillion-dollar stimulus package could inject too much money into the economy and cause inflation and even higher mortgage rates of over 4 percent,” Fairweather said.
Homebuyers looking for reasonably priced homes will likely be drawn to the condos that were shunned during the pandemic. Condos sold at a 17.3 percent discount compared to single-family homes over the past year, according to the report, but condo prices will likely grow faster than single-family home prices this year.
“If you want to buy a condo, now is the time,” Seattle Redfin agent Ben Stanfield said in a release. “I tell my buyers that if they’re open to looking at condos, we have the ability to negotiate on price and include favorable offer terms like an inspection contingency or a long escrow period.”
The report also predicts a 10 percent increase in home listings this year.
“More homeowners will decide to list in order to cash in on high home prices. And a small portion of those who were reluctant to sell during the pandemic because of fear of exposure to the coronavirus will be ready to list once vaccinated,” Fairweather said.