The reshuffling that began when work shifted to home during the pandemic is likely to become a permanent lifestyle, as employees who can work from home continue to do so part-time, according to nearly all of the panelists.
About a third of the experts were even more certain that work from home is here to stay: 36% said they expect full-time work from home to become permanent.
The pandemic’s effect on customer attitudes regarding local preferences and ideal home size drew evenly divided opinions from the panelists: 46% of the experts say they believe the preference for suburban lifestyles over urban ones represents a permanent shift, while the exact same percentage say they believe the shift is temporary.
The panel was similarly divided when asked whether consumers want to live closer to small cities over large ones or live in a large home versus a smaller one.
Demand for homes expected to push prices by 6.4%
The shift toward the home as the center of work, school and life during the pandemic contributed to the surge in home prices, as people re-evaluated their space and living needs and decided to move at a time when inventory was already low. The surge in demand pushed inventory even lower, as would-be sellers sat on the sidelines waiting for more certainty.
The widespread distribution of COVID-19 vaccines appears to be easing much of that uncertainty: 69% of the experts surveyed predict for-sale inventory will grow in the second half of 2021 or continue through the first half of 2022.
Buyer demand remains high, and homes are flying off the market within days of listing, thanks in part to technology that has made home buying and selling more efficient. The accelerated transaction time is another factor contributing to the low inventory, which is down 30% from a year ago.
Sustained demand in the face of that low inventory will continue to drive prices higher, according to the experts surveyed. On average, the panelists say they expect home values to grow 6.2% in 2021 — two percentage points higher than when the panelists weighed in during the Q4 2020 survey. Several panelists — including Zillow’s own economists — called for double-digit increases.
The second half of the year or early next year, however, should bring higher inventory, according to 69% of the respondents surveyed. The biggest driver behind the inventory boost, according to 38% of the panelists, will likely be a growing number of resale homes listed for sale.
More listings should cool down home value appreciation. Although the panelists expect home value growth to be nearly double its historically “normal” annual pace of 3.6%, they expect a slowdown through the middle of the decade. On average, the panelists say they expect home growth to slow to 4.5% in 2022, 3.7% in 2023, 3.5% in 2024 and 3.6% in 2025.
“This is the most bullish near-term outlook for home prices we’ve seen from our experts since the early stages of the post-bust recovery, and the panel’s five-year average annual home price forecast has never been more optimistic,” said Terry Loebs, founder of Pulsenomics. “In the wake of last year’s heady home equity gains, these new projections indicate that the aggregate value of homes across the country will increase by another $2 trillion in 2021. This is great news for existing homeowners, but even with a robust economic rebound in the coming months affordability will likely remain a challenge for many aspirational renters looking to move into homeownership this year.”
Opportunity abounds for builders
Although builders are likely to face more competition from resale homes in the future, they are particularly well-positioned to meet the changing needs of home buyers who are rethinking their home environments and searching for more flexible spaces.
Builders have a huge opportunity to rethink what home looks like, with innovative and flexible floor plans that speak to the changing needs of customers who are likely to be spending more time at home, even post-pandemic.
In addition to local home shoppers, a national audience of buyers is on the move. That movement provides additional opportunities to market to a bigger potential audience looking for affordability, amenities and a good internet connection.
If the expert predictions are correct, and inventory gains slow down price appreciation in 2022 and beyond, new construction has an opportunity to lay claim to what existing homes cannot: modern layouts designed for a new way of living.
Now is the time to innovate. The question is, how will you stand out?
This edition of the Zillow Home Price Expectations Survey surveyed 110 experts between February 15, 2021 and March 1, 2021. The survey was conducted by Pulsenomics LLC on behalf of Zillow, Inc. The Zillow Home Price Expectations Survey and any related materials are available through Zillow and Pulsenomics.