Arc of Recovery

After an unprecedented year, forecasts for housing and the economy in 2021

MATTHEW GARDNER, WINDERMERE CHIEF ECONOMIST

RISE IN U.S. HOME PRICES

The housing market has been a veritable shining light as we move through the pandemic. Given rising demand— and low levels of new home construction—prices will rise further next year, but I am very cognizant that we are hitting an affordability ceiling, and price growth has to slow.

THE RISE OF HOME SALES I predict that home sales will rise due to strong demand (specifically from first-time buyers) and low financing costs. Additionally, the workfrom-home concept appears to be real and, as such, I expect some urban renters to shift into home ownership. I also think other households will move because their existing homes are just not suited to working from home. My primary concern is that supply will not meet demand.

PERMITS TO BUILD single-family homes have been rising for the past few years but remain below the level necessary to meet demographically driven demand. That said, I do expect to see further improvement in 2021, with new home starts rising above 1 million units.

U.S. JOB GROWTH COVID-19 impacted the U.S. economy in a way never seen in modern history, with the loss of over 22 million jobs in just two months. Although jobs started to return in late spring, the pace of job recovery has started to slow, and will likely not pick up steam again until a vaccine becomes readily available. Assuming that happens in the next few months, I anticipate the job market will pick back up, adding over 4.6 million jobs in 2021.

U.S. UNEMPLOYMENT RATES The U.S. unemployment rate peaked at 14.7% in April—a level not seen since the Depression years. Although it has started to trend lower, I fear that it will be quite some time before we get back to the rate seen in February (3.5%). If the jobless rate is below 6% by the end of 2020, I will be pleased.

JOB GROWTH RATE BY STATE While I expect jobs to return in 2021, all markets are not created equal, and some will fare better than others. The strongest gains will likely be seen in Utah, Nevada, Idaho, Washington, and Oregon; however, the entire Western U.S. is expected to see improvements next year.