COLLEGE STATION – Researchers at the Texas Real Estate Research Center see a more stable Texas housing market ahead, as soon as pandemic-induced home shortages dissipate.
The Center’s 2021 Mid-Year Texas Housing & Economic Outlook has insights on the year ahead. Here are the takeaways.
Supply chain bottlenecks continue
The strong recovery has created supply chain bottlenecks that put upward pressure on prices and raise inflation concerns. Researchers hope the inflation pressures are transitory, but there is some uncertainty surrounding their assessment.
Mortgage rates go higher
Mortgage rates are expected to rise slightly by the end of 2021.
The period of historically low mortgage rates that existed during the pandemic will probably be over in 2022.
Mortgage rates could be somewhat higher in 2022 compared to 2021 as a result of changes in the Federal Reserve’s policy and inflation pressures.
Housing demand continues strong
The housing market will continue to be characterized by strong demand with low inventories, accompanied by strong price growth for the remainder of 2021.
Home inventory improves
The inventory of homes available for sale should improve in the coming months as listings seem to have reached a trough and are rising. This will ease some of the price pressures.
Even with homebuilders facing supply shortages of lumber, labor, appliances, and other construction materials, which have driven up prices and costs, new home construction should register strong positive growth in 2021.
Home construction growth slows in 2022
In 2022, new home construction is projected to grow but at a slower rate than the previous two years as the housing market stabilizes. The housing market will move toward a more sustainable long-run path as the pandemic housing market frenzy dissipates.
Demographics fuel Texas housing demand
Economic growth and demographic trends, such as aging millennials and migration from out of state, will help drive Texas housing demand for the remainder of 2021 and 2022.
A more balanced market in 2022
For 2022, researchers expect the supply of home for sale to increase and housing demand to remain relatively strong. This will move the housing market back into balance and cause home price growth to slow.
Once forbearance ends in the fall of 2021, even with an increase in delinquencies and foreclosures, the housing market could absorb the foreclosed homes. Researchers say it’s possible homes could be sold with a gain even before they enter foreclosure.
The Texas Real Estate Research Center has a wealth of economic information online for free.