Recent figures point to a continued hot housing market uninterrupted by concerns of possible inflationary pressures, higher mortgage rates and record prices.
Home Sales Up by 17 Percent in 2021
National U.S. property broker Redfin forecasts a record $2.53 trillion worth of home sales in America in 2021–a 17% year-over-year gain that would mark the largest annual increase in percentage terms since 2013.
“We expect 2021 to be an even more active year for the housing market than 2020 because homebuyers have a better sense of what the future looks like,” said Redfin Chief Economist Daryl Fairweather.
The South is expected to lead the way with $1.09 trillion of home sales forecast for 2021, followed by the West with $696.3 billion, the Midwest with $422.6 billion and the Northeast with $322.8 billion.
The South has consistently held the top spot, but has inched further ahead in recent years. This is likely because it has more vacant land on which to build, and has attracted scores of out-of-town homebuyers who are in search of affordability and space, Fairweather said. Seven of the 10 U.S. metros with the biggest net inflows in the first quarter were in the South. Net inflow is a measure of how many more Redfin.com home searchers looked to move into a metro than leave.
“A lot of wealth from the coasts is shifting South,” said Fairweather. “Affluent homebuyers from New York and San Francisco have moved to places like Florida and Texas during the pandemic, which has fueled home sales and driven up prices in those areas.”
California Median Home Prices Reach $800K
According to the California Association of Realtors, heated market conditions and a shortage of homes for sale continued to put upward pressure on home prices in California, driving the state’s median price above the $800,000 benchmark for the first time ever in April 2021, as home sales soared from last year’s pandemic-level lows. The median home price of a California single family home (SFH) was $606K in April 2020.
Nearly a Third of American Homes Have Over 50 Percent Equity
According to ATTOM Data Solutions’ first-quarter 2021 U.S. Home Equity & Underwater Report, 17.8 million residential properties in the United States were considered equity-rich, meaning that the combined estimated amount of loans secured by those properties was 50 percent or less of their estimated market value.
“It continues to be a great time to be a homeowner most everywhere in the country. The ongoing price spikes we’re seeing help to cut down the number of seriously underwater properties and boost the level of equity-rich properties,” said Todd Teta, chief product officer with ATTOM Data Solutions. “However, that may shift once the foreclosure moratorium is lifted and that’s something we’re watching, partly because it could limit equity gains and draw people underwater. For now, though, the equity picture remains one of many signs that the long U.S. housing market boom keeps charging ahead.”
Western and northeastern states show biggest improvement in equity-rich share of homes
Nine of the 10 states with the biggest gains in the share of equity-rich homes from the fourth quarter of 2020 to the first quarter of 2021 were in the West or Northeast. States where the portion of mortgaged homes considered equity-rich rose most were Idaho (up from 42.7 percent in the fourth quarter of 2020 to 50.6 percent in the first quarter of 2021), Utah (up from 37.9 percent to 42.5 percent), Colorado (up from 36.5 percent to 40.6 percent), Vermont (up from 47.8 percent to 51.5 percent) and Washington (up from 41 percent to 44.5 percent).
States where the share of equity-rich homes decreased the most from the fourth quarter of 2020 to the first quarter of 2021 were West Virginia (down from 21.6 percent of mortgaged properties to 19.5 percent), Louisiana (down from 17.1 percent to 15.7 percent), Pennsylvania (down from 26.1 percent to 24.9 percent), Iowa (down from 22.1 percent to 20.9 percent) and Mississippi (down from 25.6 percent to 25.2 percent).
Largest declines in underwater properties across Midwest and South
Nine of the 10 states with the biggest declines in the percentage of mortgaged homes considered seriously underwater from the fourth quarter of 2020 to the first quarter of 2021 were in the South and Midwest. They were led by Iowa (share of homes seriously underwater down from 11.3 percent to 8.7 percent), Mississippi (down from 11.4 percent to 9.1 percent), Louisiana (down from 14.9 percent to 13 percent), South Dakota (down from 8.2 percent to 6.3 percent) and Nebraska (down from 7.3 percent to 5.5 percent).
States where the percentage of seriously underwater homes rose, or dropped by the smallest amounts, from the fourth quarter to the first quarter were Pennsylvania (up from 7.1 percent to 7.3 percent), Oklahoma (down from 8.3 percent to 8.2 percent), Washington (down from 2.2 percent to 2.1 percent), Illinois (down from 10.6 percent to 10.4 percent) and Minnesota (down from 4.2 percent to 3.9 percent).
Northeast and West continue to have largest shares of equity-rich homes
The Northeast and West again had far higher levels of equity-rich properties than other regions. The top 11 states with the highest levels in the first quarter of 2021 were led by Vermont, (51.5 percent of mortgage properties were equity-rich), Idaho (50.6 percent), California (49 percent), Washington (44.5 percent) and Utah (42.5 percent).
The 10 states with the lowest percentage of equity-rich properties in the first quarter of 2021 were in the Midwest and South, led by Louisiana (15.7 percent), Illinois (16.8 percent), Oklahoma (18 percent), West Virginia (19.5 percent) and Alabama (20.3 percent).
Among 106 metropolitan statistical areas with a population greater than 500,000, the 10 with the highest shares of equity-rich properties again were in the West during the first quarter of 2021. They were led by San Jose, CA (67.4 percent of mortgaged properties were equity-rich); San Francisco, CA (60.8 percent); Boise, ID (53.8 percent); Los Angeles, CA (53.6 percent) and San Diego, CA (49.3 percent). The leader in the Northeast region again was Boston, MA (41 percent), while Grand Rapids, MI, continued to top the Midwest (33.1 percent) and Dallas, TX, led the South (43.4 percent).
Metro areas with the lowest percentage of equity-rich properties in the first quarter of 2021 continued to be Baton Rouge, LA (12.7 percent equity-rich); Columbia, SC (14.2 percent); Akron, OH (16.3 percent); Tulsa, OK (16.6 percent) and Little Rock, AR (16.8 percent).
Among the 106 metro areas analyzed, 86 (81 percent) showed an increase in levels of equity-rich properties from the fourth quarter of 2020 to the first quarter of 2021; while 20 (19 percent) showed a decrease.
San Francisco area dominates list of top equity-rich counties
Among 1,261 counties that had at least 2,500 properties with mortgages in the first quarter of 2021, 18 of the top 20 equity-rich locations were in the West. The highest concentration again was in the San Francisco Bay area of California.
Counties with the highest share of equity-rich properties were San Mateo County, CA ( outside San Francisco) (70.9 percent or mortgage homes were equity-rich); Washington County, WI (outside Milwaukee) (70.3 percent); Santa Clara County (San Jose), CA (68.3 percent); Monterey County, CA (outside San Francisco) (64.5 percent) and San Francisco County, CA (64 percent)
Counties with the smallest share were Cumberland County (Fayetteville), NC (7.6 percent); Brown County, OH (outside Cincinnati) (7.7 percent); Hoke County, NC (outside Fayetteville) (8.6 percent); Vernon Parish, LA (west of Alexandria) (8.6 percent) and Iberville Parish, LA (outside Baton Rouge) (9.7 percent).
At least half of mortgaged properties were equity-rich in 653 zip codes
Among 5,438 U.S. zip codes that had at least 2,000 properties with mortgages in the first quarter of 2021, there were 653 where at least half of all properties with a mortgage were equity-rich.
Forty-six of the top 50 were in California, mostly in the San Francisco Bay area. They were led by zip codes 94024 in Los Altos, CA (81.8 percent equity-rich); 94301 in Palo Alto, CA (80.2 percent); 94306 in Palo Alto, CA (80.1 percent); 94707 in Berkeley, CA (78.9 percent) and 94022 in Los Altos, CA (78.7 percent).
South and Midwest continue to have highest seriously underwater shares
The top 10 states with the highest shares of mortgages that were seriously underwater in the first quarter of 2021 were all in the South and Midwest, led by Louisiana (13 percent seriously underwater), West Virginia (10.5 percent), Illinois (10.4 percent), Arkansas (9.2 percent) and Mississippi (9.1 percent). The smallest percentages again were in Oregon (1.8 percent), California (1.9 percent), Arizona (2 percent), Washington (2.1 percent) and Utah (2.1 percent).
Among 106 metropolitan statistical areas with a population greater than 500,000, those with the highest share of mortgages that were seriously underwater in the first quarter of 2021 were Baton Rouge, LA (13.2 percent); Toledo, OH (10.8 percent); Akron, OH (10.5 percent); New Orleans, LA (10.2 percent) and Youngstown, OH (10 percent).
Among the 106 metro areas, just 6 (6 percent) showed an increase in levels of seriously underwater properties from the fourth quarter of 2020 to the first quarter of 2021; while 100 (94 percent) showed a decrease.
At least 25 percent of mortgaged properties were seriously underwater in 41 zip codes
Among 5,438 U.S. zip codes that had at least 2,000 properties with mortgages in the first quarter of 2021, there were 39 zip codes where at least a quarter of all properties with a mortgage were seriously underwater. The largest number of those zip codes were in Cleveland, OH; Akron, OH, and St. Louis, MO.
The top five zip codes with the highest shares of seriously underwater properties were 95969 in Paradise, CA (80.2 percent or mortgaged homes were seriously underwater); 44105 in Cleveland, OH (52.4 percent); 44110 in Cleveland, OH (51.9 percent); 44112 in Cleveland, OH (47.7 percent) and 63137 in St. Louis, MO (45.5 percent).
Demand for Second Homes Is More Than Double Pre-Pandemic Levels
National property broker Redfin is reporting this week the number of U.S. buyers who locked in mortgage rates for second homes soared 178% year over year in April 2021, marking the 11th straight month of 80%-plus growth.
The rise in demand for second homes is more than twice the increase for primary homes, with the number of buyers who locked in mortgage rates for primary homes rising 78% year over year in April. That’s a record jump, too, but should also be taken in context, as demand for primary homes dropped last April due to the pandemic.
Demand for vacation homes remains elevated as wealthy Americans continue to have the freedom to work remotely and earn money from robust stock portfolios and rising home values. Even as some offices start to reopen, many Americans plan to work remotely for the long term, at least part of the time.
“The combination of the wealthy becoming wealthier, remote work turning into the new normal and low mortgage rates is creating an ideal environment for affluent Americans to buy vacation homes,” said Redfin Chief Economist Daryl Fairweather. “As long as the economy continues to grow, I don’t foresee demand for second homes slowing down anytime soon.”
The elevated demand for second homes in the pandemic era is one sign of economic inequality in the U.S., with some buyers able to afford second homes and others unable to become homeowners at all.
“I’m working with several second-home buyers right now, and a few other clients who are selling vacation homes that have been in the family for decades,” said Lisa C. Smith, a Redfin real estate agent in Myrtle Beach, SC. “The vacation rental market is predicted to be especially hot this summer because most people are still able to work remotely, and others are using vacation time they saved up at the height of the pandemic. A lot of investors are noticing the intensity of the rental market here and snapping up homes and condos for short-term rentals. They feel property is still affordable and taxes are cheaper in this area than other parts of the country. There are new listings hitting the market every day because homeowners are realizing now is a great time to sell their vacation properties. Sellers have seen prices go up, and many of them are able to sell and pocket the equity.”