The housing stock shortage begins to ease
Expect a stable housing market over the next five years – despite the expiration of COVID-era protections – says one new Zillow report.
The Zillow Home Price Expectations Survey, conducted by Pulsenomics, interviewed 111 housing experts throughout August. The panel included economists, researchers, analysts and academics. And their insight reveals some hopeful predictions.
Since the start of the pandemic in 2020, the housing stock has been exceeded by record demand. The ability to work abroad, in turn, stimulated a “Big reshuffle, particularly to exurb communities. Coupled with low interest rates, the market quickly became oversaturated with buyers. Inventory, meanwhile, at a standstill. New construction has also slowed under the weight of supply chain issues, caused by the ongoing pandemic. The overall lack of supply contributed to the surge in house prices, which reached an annual appreciation of 17.7% in August.
But now stocks are on the rise again. As vaccinations became widespread in the spring of 2021, more homeowners felt comfortable listing their properties. And in August, Zillow reported a fourth consecutive monthly increase in inventory. With the easing of competition, Nicole Bachaud, Economic Data Analyst at Zillow, explained: “This is good news for many potential buyers, who should see more options to make their home search easier. Along with the expected moderation in price appreciation in the coming months, the market is starting to move towards a balance between buyers and sellers, although this middle ground is still far away. “
Pulsenomics founder Terry Loebs also commented on this market development. “The bright side for aspiring homeowners is that the worst of the housing supply crisis finally seems to be behind us, and most experts believe last year’s rapid price boil has started to lift. mitigate, ”he said.
This influx of housing onto the market comes, distinctly, at the end of federal moratoria on evictions and foreclosures. The Centers for Disease Control had put a moratorium on evictions in place in March 2020; it was then extended for much of 2021 until it was struck down by the United States Supreme Court end of June. The moratorium ended at the end of July and the federal moratorium on foreclosures expired on July 31.
However, according to the Zillow Home Price Expectations Survey, evictions will likely make up the smallest share of the new home stock. Panelists believe that the largest source of available housing will come from the simple relocation of existing owners. Like large bands of owners get out of abstention plans, made necessary by the pandemic, this is particularly likely, according to the report. “Now, with more confidence in their long-term housing decisions, we see existing homeowners finally returning to the market as sellers, who will provide most of the inventory for sale over the next year or so.” , said Bachaud. This particular scenario should represent 39.7% of the available supply over the next year.
The second largest source of inventory, according to panelists, will be new construction. Despite supply chain setbacks, new construction is expected to account for 22.5% of inventory in the market.
In terms of the constitution of the general stock, new construction should be followed by owners registering rental housing (12.2%), existing owners now choosing to rent (9.6%), existing owners registering second homes (8.6%), other (7.2%) and elderly deceased owners (5.5%).
There remains, of course, the question of seizures and evictions. Despite the end of the moratorium on foreclosures, panelists in the Zillow survey predict that foreclosures will only represent 5.4% of the future housing stock: the smallest percentage. In Illinois, however, it should be noted that a spike in foreclosures is already evident. Illinois had the highest foreclosure rate in the country in August, according to data from ATTOM’s US Foreclosure Market Report. Among major metropolises, Chicago’s foreclosure rate was the third highest in the country.
As for tenants, Zillow predicts evictions will occur at 1.5 times the pre-pandemic rate as a result of the moratorium. Zillow estimates that more than 485,000 evictions will be filed in September and October of this year, with a projection of 268,000 evicted: around 0.6% of total US tenants. Again, the exact number of evicted tenants will depend on the actual distribution of federal relief funds. According to the US Department of the Treasury, only $ 5.1 billion of the $ 46.5 billion in rental relief had been distributed locally as of August 25.
Although a significant number of people are affected, experts seem fairly divided on how the end of the moratorium will affect rental costs. The majority, however, do not plan to change the rent: 34% of the panelists. Meanwhile, 26% expect rents to increase slightly, 20% say rents will increase modestly, and 14% believe rents will drop somewhat. Only 6% expected a significant increase in rents.
Projected house prices, on the other hand, were the subject of a more certain consensus. Taking into account the additions to the building stock, surveyed experts predicted a cumulative price increase of 31.8% through 2025, equivalent to an increase of 5.7% per year. And while this remains significant, it is well below the current annual appreciation of 17%. Stabilization seems imminent.