Center economists look ahead to 2021
COLLEGE STATION – Economists at the Texas Real Estate Research Center have issued their 2021 outlook for housing and the state economy, a task made more difficult by unprecedented unknowns.
"The economy could look different coming out of the pandemic as some changes become permanent," said Center Research Economist Dr. Luis Torres. "Because this recession was caused by a health catastrophe, the recovery path could be different than that of previous recessions. Consumer and business safety expectations will play an important role in the economy’s full reopening."
The 2021 housing market will be characterized by strong demand with low inventories accompanied by solid price growth. Inventories of homes priced under $300,000 will be especially low, affecting sales in that price range. Price growth will be positive because of stable demand. Low-skill/low-wage earners were hurt the most economically, and they are typically renters, not homebuyers.
Demographic trends, such as aging millennials and migration from out of state, will help drive Texas housing demand in 2021.
Homebuilders are trying to satisfy demand in the lower price cohorts by building homes in the suburbs or outer city borders where land costs are lower. This trend was prevalent before the pandemic but has accelerated during COVID-19.
Monetary policy implemented by the Federal Reserve, low inflation expectations, and slow economic growth are expected to keep mortgage rates low. Mortgage refinancing, however, will slow as lenders add more requisites and the pool of households able to refinance diminishes.
"According to the Mortgage Bankers Association, 2.7 million homeowners (5.5 percent of all home loans) were in forbearance as of Dec. 13, 2020,” said Torres. “The share of homeowners who will be able to make their mortgage payments once forbearance ends is unknown, but we expect delinquencies and foreclosures, which have so far been kept low by government policy, to increase during the year."
For information on the apartment market, commercial real estate, oil and gas, and rural land, read the 2021 Texas Housing & Economic Outlook.
The Real Estate Center has a wealth of economic information online for free.
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