28+ Housing Market Predictions for 2021-2025 [Is the Crash Coming?]

Share on facebook
Share on twitter
Share on pinterest
Share on linkedin
Share on email
Share on print
Housing Market Predictions for 2021, 2022, 2023, 2024, 2025 with Kathy Fettke (Will the Housing Market Crash??)

Summary: In this ultimate guide to the housing market, expert real estate investor, Kathy Fettke, shares over 28 housing market predictions for the years 2021, 2022, 2023, 2024 and 2025. She also answers one of the biggest questions investors ask every year: Will the housing market crash? And if so, when? NOTE: Kathy has been making annual real estate market predictions for real estate investors every year since 2005. Her predictions have been correct every single year. Learn more about Kathy’s story here.

Introduction

I’ve been helping new and experienced investors purchase cash flowing real estate nationwide for almost two decades now. In fact, I was one of the few who predicted the Great Recession and encouraged thousands of people to sell their high-priced, low cash flow properties in the expensive “bubble” markets and 1031 exchange them for high cash flow properties in affordable, emerging markets.

From 2005-2008, I was a mortgage broker and I knew something was wrong when I could give just about anybody a loan of nearly any size, and unlimited no-money-down loans to investors. I knew this kind of easy, careless lending was creating a bubble that would pop when those loans were due. In places like Las Vegas, the average home price nearly doubled in just one year.

Image Highlighting - Kathy Fettke Quote

But Dallas, TX had the opposite problem. Prices were 26% undervalued compared to incomes, which were growing faster than home prices due to massive job growth in the area.  I showed one woman how she could sell three of her older, run-down properties in Stockton, California for $400,000 each and exchange them, tax-deferred, for brand new homes in Dallas that cost $140,000 each. She was able to quintuple her cash flow with that one financial move and quit her day job. 

18 months later, the Stockton properties she sold were worth $75,000 each at best. That was, of course, one of the worst-hit markets in the Great Recession, because it was also one of the biggest bubbles prior to the housing crash. On the other hand, the Dallas properties never lost value, and in fact, tripled in value 10 years later. 

Location is important when it comes to buying or selling real estate, but timing may be even more important. That’s why I’ve offered my new housing market predictions every January, sharing what I believe will happen with the real estate market based on my many interviews with economists, 40-year veteran real estate investors and our boots-on-the-street property teams nationwide. 

So far, since 2005, I’ve been right. In 2020, I didn’t predict that a virus would knock down the economy, but I did tell my audience I expected a black swan event would hit soon that would shake things up. I’ll explain why I knew that later in this article.

This year, I decided to dive in even deeper and provide housing market predictions for the next 5 years. As a buy and hold real estate investor and developer, we have to be able to see beyond one year. 

Looking to invest in real estate for cash flow?

Click here to become a member of RealWealth to View Sample Properties & Connect with Property Teams in some of the best housing markets around the United States. Joining is 100% free and takes less than 5 minutes! 😊

13 Nationwide Housing Market Predictions for 2021

My top 13 housing market predictions for 2021 are:

  1. Unemployment rates will continue to improve
  2. There will be a slight uptick in mortgage defaults
  3. Lending standards will loosen
  4. There will be a permanent shift working remotely
  5. Low interest rates will stick around
  6. There will be more government spending and increased national debt
  7. People will continue to invest in more stable, cash flowing assets
  8. The number of renters will rise
  9. Consumers will leave big cities to buy or rent new homes
  10. Inflation will increase
  11. Home prices will continue rising, especially in the affordable range
  12. Political certainty will calm the real estate market
  13. Tariffs will continue to impact the cost of goods and services, driving prices up.

13 Nationwide Housing Market Predictions For 2021 Infographic

2021 Prediction #1: Unemployment Rates Will Improve

Unemployment rates soared when the Coronavirus hit and businesses were shut down. As the economy started to slowly and cautiously open back up, most metros saw at least 50% of those jobs return. The national unemployment rate hit 6.9% as of November of 2020. 

Image Highlighting - Prediction 1 Unemployment Rates Will Improve

Unfortunately, as we move into winter, we are seeing what some of the medical experts predicted: a resurgence of Coronavirus cases. Just as jobs were trickling back into the economy, positive COVID-19 cases were coming back with a vengeance. A number of cities have had to re-enforce mask mandates, public safety precautions and close down businesses again. 

However, many businesses have figured out new ways of surviving in a coronavirus era. Restaurants have moved tables into parking lots or focused on take out and delivery services. Financial services have moved mostly online. Construction workers wear masks and social distance. Consumers have figured out how to get what they want with a click of a button.

As soon as a vaccine is approved, we can expect a major bounce back in the economy. News that Phizer and Moderna are close to being approved and released as soon as next month sent the stock market soaring. The Dow Jones hit a new record high on that news, reaching the 30,000 milestone. Additionally, hospital workers understand how to treat the virus much better now than they did 6 months ago.

The chief economist of the Mortgage Bankers Association expects 3% GDP growth in 2021, 2% in 2022 and 1.9% in 2023. This kind of steady economic growth translates to new jobs. 

2021 Prediction #2: Slight Uptick in Mortgage Defaults

Whenever there’s an increase in unemployment, there’s usually an uptick in foreclosures as well. During 2020, most people didn’t lose their jobs due to poor performance. Instead, they were simply not allowed to go to work or their place of employment was temporarily shut down. As a result, the government issued a foreclosure and eviction moratorium. Homeown

ers were given the option of forbearance – which is the ability to hold off on making mortgage payments until a later date.

Image Highlighting - Prediction 2 Slight Uptick in Mortgage Defaults

According to the Mortgage Bankers Association, the share of mortgages in forbearance dropped to 6.93% as of September of 2020. The trade group estimates that roughly 3.5 million homeowners are in forbearance.

After the Great Recession, banks learned that flooding the market with foreclosures is not good for the value of the underlying asset they are trying to sell. It is highly unlikely that they will decide to foreclose on millions of people who were not at choice about whether they could work or not. Instead, I believe banks will offer loan modifications, and just allow borrowers to add those missed payments to the end of the loan.

Still, there will be some businesses that do not survive this crisis and workers who will remain unemployed. As a result, there will be an uptick in mortgage defaults but nowhere near the levels of the Great Recession. With the lack of inventory on the market, distressed homeowners can try to sell their property at full market value, instead of losing all the equity they’ve built. Additionally, iBuyers would be quick to make an all cash offer before the banks can get to it. 

If you were hoping for home prices to decline from a flood of foreclosures, you may be disappointed. I expect home prices will continue to rise due to record low interest rates, high demand and low supply. 

Those who cannot afford to buy will become renters, which will spark further interest from investors wanting to buy any available inventory that hits the market and turn it into rental homes. 

2021 Prediction #3: Loosened Lending Standards

With super low interest rates in 2020, the purchase and refinancing industry has been very busy. Low rates, combined with a newfound desire to live in a home that meets the needs of the “new normal,” has fueled strong demand for housing across the country. 

Image Highlighting - Prediction 3 Loosened Lending Standards

While credit availability tightened at the beginning of the pandemic, when most people expected job losses would result in a mass of foreclosures, the opposite actually happened. And as more and more evidence shows that home prices are rising, not falling, and that the supply of housing is shrinking, not growing, lenders have begun to relax. 

Of course, the influx of trillions of dollars of new money also helped. Back in March, the Federal Reserve announced it would unleash “unlimited” amounts of stimulus to keep banks afloat and lending. It worked. 

According to the Scotsman Guide, October saw mortgage credit availability increase, reversing a tightening trend that started in July.

The Mortgage Bankers Association (MBA) measures credit availability through its  Mortgage Credit Availability Index (MCAI). It increased month over month by 2.3% to a reading of 121.3 in October. A rising index reveals that lenders are loosening their credit standards.

Joel Kan, the MBA’s associate vice president of economic and industry forecasting said, “After seeing a drop in supply of around 60% since the onset of the pandemic, the jumbo [loan] rebounded 6.1% in October to its highest level since July of this year,” He added that “There was also an increase in ARM (adjustable rate mortgages), likely driven by the GSE’s (government sponsored enterprises) September 30 deadline for LIBOR ARM loan applications.” 

It’s very likely that these looser lending standards will carry over into 2021 as the housing market continues to boom from low supply and high demand.

2021 Prediction #4: A Permanent Shift to Working Remotely

Millions of Americans have shifted to working from home since COVID-19 shut down their offices. While some people thought this trend might be short-lived, those of us who have been working remotely prior to the pandemic already knew this was a more efficient, more affordable way to do business. Now the world has caught on as zoom meetings have become part of the “new normal.”

Image Highlighting - Prediction 4 A Permanent Shift to Working Remotely

At RealWealth, we’ve been a remote company since 2010, when Rich and I decided we wanted to live near the beach so that we could surf before and after work. We ditched our 7-office lease near San Francisco, and instead invested in annual retreats for our employees to get together. This allowed us to hire the best people for the job, not just someone who lived nearby. We have staff in Utah, Ohio, Wisconsin, Florida and California. We even have two employees who ditched the idea of living in one place. One lives on a boat and the other lives in a different country every month, working from various Airbnb’s. 

Having happy employees is good for business. Our profits increased dramatically after making that move, and we hit the Inc 5000 list three years in a row. Other companies have learned this “trick” as well in 2020.

Generally, employees like the option of working remotely 2 or 3 days a week. They also like the idea of owning a home, which is cost-prohibitive in most large metro areas where they work. 

More and more employers are on board with this policy because they are learning it hasn’t negatively affected productivity.  In fact, working from home can be more efficient because employees spend less time in traffic and are sick less often from sharing office space with those who don’t want to take a sick day. Plus, office space can be the single largest expense for some businesses. That’s why many companies are more profitable, even if sales are down, because expenses are also down.

This permanent shift to working remotely is only going to put more emphasis on the value of homes. After all, everyone wants an office with a window and a great view with no commute, and a much better lunchroom. 

Real estate is a broad industry. Obviously, office space is a tough business to be in right now. But this also explains why the United States real estate market is on fire, as more homes take the place of offices, and have also become the restaurant, school, gym and vacation spot. 

2021 Prediction #5: Low Interest Rates Will Stick Around

According to a recent survey of major housing authorities, 30-year, fixed rate mortgages will stay around 3% until the end of 2021. 

Image Highlighting - Prediction 5 Low Interest Rates Will Stick Around

Low interest rates increase housing affordability. That also tends to drive home prices up as more and more people are chasing the same limited inventory. 

Low interest rates also increase cash flow for real estate investors. That means more and more investors will want to buy up homes to put on the rental market. This further decreases inventory, which could drive prices up as supply diminishes while demand flourishes. 

Plus, as more people discover they can live in more affordable areas as they work remotely, we will likely see an uptick in purchases in the suburbs, exurbs and even rural areas. On the flip side, we may continue to see increased inventory in expensive metros like San Francisco, LA, and NY. 

And as more people lock in low interest rates, they are likely to stay put. This further affects available inventory. I always recommend starting your real estate journey by speaking with a mortgage broker. You might be shocked at what you can qualify for with today’s low rates.

2021 Prediction #6: More Government Spending/National Debt

Our national debt is growing faster than the GDP. It’s been on a tear since it doubled from $5 trillion to $10 trillion during the Bush presidency, and then doubled again from $10 to $20 trillion during the Obama presidency. And then increased again during the Trump administration to $27 trillion dollars in national debt. 

Image Highlighting - Prediction 6 More Government Spending and National Debt

This year alone, the government issued trillions of dollars in aid for businesses and those who became unemployed due to the Coronavirus. A $2.2 trillion economic rescue plan, the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, was passed by Congress and signed into law by President Donald Trump on March 27, 2020.

Congress has been negotiating an even larger stimulus package, in the $3 Trillion range. Gridlock in Washington has slowed it down, but I believe we can expect some kind of large financial aid will likely pass over the coming months as the number of coronavirus cases increases this winter, forcing many businesses to close down again. 

While more stimulus may be needed to help families feed themselves during these difficult times, there are a number of consequences that come with monetary expansion, which is essentially “free money.”

It’s important to understand that the idea of creating money out of thin air and pouring it into the economy is meant to drive asset values up. The government wants to prevent deflation – or the decline of prices. That can lead to a recession or even a depression if prices get low enough. In that scenario, businesses can’t charge enough to make a profit so they go bankrupt and employees lose their jobs.

Government stimulus is meant to create inflation. As unattractive as it sounds to have to pay more for the same things every year, the Fed wants to see at least 2% inflation. If you own products or assets or offer services, you can benefit by charging more every year. If you don’t, you are stuck with less purchasing power every year.

The best option in a stimulus-fueled, inflationary economy is to own assets that inflate. With real estate, both the underlying asset and the rents tend to increase overtime. This is especially beneficial when you are locked into a low-fixed rate mortgage payment.

It’s also important to understand that when national debt is high, governments will need to raise taxes. It will be beneficial to own assets that come with tax incentives, like business and real estate. (When real estate is treated like a business, the tax incentives are even better.)

Eventually, the government will need to pay off that national debt with new debt. This mean they will probably need to raise the yield of treasury securities as a way to attract new investors. When the yield increases, so does the cost of borrowing money, generally, because the same inventors that buy treasuries also buy mortgage-backed securities. 

In times like now, when there are fewer buyers for those treasuries, the Federal Reserve steps in as the Buyer of Last Resort. The Fed is willing to accept a low yield, which in turn keeps interest rates low. This is how the Fed builds up its balance sheet. At some point, they will need to unload it. But that certainly won’t happen over the next few years. The last time the Fed tried to lower its balance sheet, the housing market stalled so the Fed quickly reversed course and jumped in to buy more bonds. Lots of National Debt may become the “new normal.”

Warren Buffet said he’s not worried about it, so I guess I won’t be for now either.

2021 Prediction #7: People Will Invest in More Stable Assets

The year 2020 has been unstable, to say the least. A global pandemic shutdown businesses and sent millions of people to the unemployment line. We arguably experienced the most divisive presidential election in history, amidst political and social protests against racially motivated violence toward people of color.  

Image Highlighting - Prediction 7 People Will Invest in More Stable Assets

Yet during all of this, the stock market and real estate values hit new highs. How is that possible?

In one word: stimulus. 

When trillions of dollars are poured into the economy to prop it up, it generally works and investors know this. The stock market rallied upon the announcement of more monetary stimulus. 

Many who lost their jobs made more money from unemployment. Businesses received loans that could be completely forgiven if they kept all their employees. Individuals received $1,200 in stimulus, whether they lost their job or not.

Still, 2020 was full of chaos. Nervous investors looking to protect their nest egg pulled their investments to have cash-on-hand. They are now ready and willing to invest those funds into something that feels more certain amidst so much uncertainty.

Many are looking for investments that may have lower yields but also less volatility. Additionally, many of these investors are looking for dividends, or some kind of cash flow. Real estate has proven time and again to be an extremely stable long-term asset that provides long term appreciation and short term cash flow. 

Residential real estate was only really affected on a large scale during the Great Depression and the Great Recession. It held strong during most other recessions on a nationwide level. Of course there are always pockets that get affected more than others, depending on the industries in those towns. 

That’s why at RealWealth, we consider a “stable” market as one that is heavily diversified in employment and not dependent on any one sector like oil or travel. We also consider it stable if the average person can afford the average rent or mortgage payment.

2021 Prediction #8: There Will Be More Renters

Even before the pandemic, the number of renters was increasing. We had record household growth, due to the large millennial population coming of age. This generation of over 72 million young people entered the workforce during and after the Great Recession, so they were behind prior generations in terms of savings and the ability to buy a home. 

Image Highlighting - Prediction 8 There Will Be More Renters

Additionally, one of the fastest growing groups of renters during the 2010s was the next largest generation – the baby boomers. As they face retirement, many have sold their homes to live off the equity and rent instead. Or they just never recovered from the Great Recession and were forced to rent.

It’s hard to imagine every homeowner today will be unscathed from the economic impacts of the Coronavirus. Not everyone will be able to make their mortgage payment when the forbearance timeline runs out. These people will be forced to sell their homes, and if they can’t sell, they will face delinquency and possible foreclosure.  That will turn some of today’s homeowners into renters.  

This demographic of “new” renters will likely be looking for affordable rentals, which is an asset class that is already in short supply. Builders simply can’t make a profit by developing affordable homes. That means rents could continue to rise over the coming years, which creates an opportunity for investors in 2021 and beyond.

2021 Prediction #9: Consumers Will Leave Big Cities & Buy/Rent New Homes

A trend that started before 2020 but really picked up speed after the COVID-19 outbreak is migration out from big cities and into the suburbs. Specifically, the demographic trends showed strong migration to the Southeast of the United States.

Image Highlighting - Prediction 9 Consumers Will Leave Big Cities and Buy Rent New Homes

Working remotely has enabled people to basically pick up and go wherever they want, so long as they have internet access. People living in densely populated cities during the pandemic can now escape crowded places and cramped apartments in exchange for roomier and much more affordable living environments with plenty of fresh air. 

People can now live where they only hoped to retire. They can ski or hike or fish after work because they no longer sit in a car on a crowded freeway for hours a day.

Not only are people happy to exit big, expensive cities, they’re also interested in moving into single family homes that provide more space. The big city becomes less attractive when restaurants, gyms and entertainment are shut down – and when socializing becomes a no no. 

People want amenities they couldn’t afford in a big city, like a private outdoor space, more distance between neighbors, room for a home office, a home gym, and a playroom for the kids.  The suburbs are back in style, especially in affordable areas that also have outdoor recreation. 

Housing outside of big cities is where money will be flowing for years to come, because the idea of quarantining again when the next virus hits is enough to scare anyone into creating their own little fortress. 

2021 Prediction #10: Inflation Will Increase

As I discussed earlier, the Federal Reserve is trying to create inflation to combat deflation. And the Fed usually gets what it wants. 

Image Highlighting - Prediction 10 Inflation Will Increase

Expect inflation to rise due to continued quantitative easing (money printing). The more money that can chase the same assets, the more valuable those assets become. 

We know there is limited housing inventory already because builders mainly focused on high-end homes, downtown condos and apartments over the past decade. Affordable housing just wasn’t profitable enough, especially in 2nd and 3rd tier cities. 

Cincinnati is a great example of that. You didn’t find a lot of public builders clamoring over Ohio, yet now the metro area is booming with people who desire the white picket fence and the good old fashioned American Dream. In the past few months alone, offers have come in at 20% over asking price simply due to high demand and low supply.

At RealWealth, we took a risk and bought land in Bozeman, MT several years ago with the intent to build a subdivision of affordable housing. We saw that there were no other public builders there, yet the university town was growing. Prices were becoming out of reach for the average person. 

Today, those homes are selling before we can build them, as more people realize Bozeman is a great little place to work from home and ski, fish, hike or mountain bike on the weekends.

Inflation is great for those who own assets like real estate and stocks. It’s not so good if you’re a renter and don’t own assets. That’s why the divide between the haves and the have nots continues to grow. It’s also why we spend so much time at RealWealth educating people on the importance of acquiring real estate – and that through leverage, anyone can do it.

Inflation is also not great for savers since the value of cash declines in an inflationary environment. It’s also not great if you’re sitting on a pile of equity as it becomes less valuable every year. However, inflation is great when you have debt because the debt becomes less valuable every year as well. Imagine if you got a  30 year fixed rate mortgage 20 years ago. That payment would feel like nothing, and if you were collecting rents on the building, the rents would be much, much higher than the payment. This is a major reason the government wants to create inflation –  to decrease the value of its massive deficit. 

Homeowners and investors who financed their property can count on rising inflation to eat away at their debt while the asset increases in value. It’s basically like getting a raise every year for doing nothing but owning real estate, and it’s why the rich keep getting richer.

2021 Prediction #11: Home Prices Will Continue Rising

Home prices in most markets around the country are high, even though we are in a recession. Why?

Image Highlighting - Prediction 11 Home Prices Will Continue Rising

As I mentioned before, it comes down to supply and demand. Demand is high due to the coronavirus driving people out of cities, condos and apartments. Supply is low due to rising building costs, increased regulations, lack of construction financing, short-term rentals, and people staying put. 

The lack of supply cannot be fixed overnight. It can take years to get a subdivision up and running. At RealWealth, we bought 4,200 lots in the Tampa area during the Great Recession for ten cents on the dollar. 10 years later we finally have the approvals to build. The resources needed to build a subdivision are not always available, like water rights and access to power and sewer. Plus, financing for these types of projects dried up during the Great Recession. 

Demand won’t likely wane anytime soon either. Millennials are just now forming families and at the typical home buying stage in life. Behind them is another generation of Gen Z that is graduating from college and not keen to move back in with mom and dad. Finally, the baby boomers are living longer. And the population in the US continues to grow. There are more than 25 million more Americans than there were during the Great Recession just 10 years ago. These people need a place to live.

As long as interest rates remain low, which will likely be a while, housing will continue to boom – especially in affordable markets.

At some point, interest rates will go back up in order to help cover the national debt. When that happens, don’t expect a lot of people to want to move to a new home and take on higher interest rates. They will likely stay put, which will in turn, affect supply. 

With inventory so low as well as interest rates, housing and economic experts predict that home prices may continue to increase. They went up 12-15% this year on a national level during one of the craziest economic cycles in history. 

2021 Prediction #12: Political Certainty Will Calm the Housing Market

Election years can be intense and often bring a lot of fear and uncertainty to consumers. 2020 was the epitome of that. 

Image Highlighting - Prediction 12 Political Certainty Will Calm Housing Market

But now that we have some idea of who will be president, we can expect things to calm down a bit.

Additionally, the half the country that was disappointed in the election results can relax knowing we have a split Congress. 

Wall Street loves gridlock in Washington because it means things won’t change too rapidly. While some people are terrified about changes in taxes and regulations, it could take years for those policies to actually take place, if ever. 

The 2020 presidential election has been a point of contention and divisiveness for the nation. Hopefully, now we can come together as a nation, at least until 3 years from now when we go through all of this again…

2021 Prediction #13: Tariffs Will Impact the Cost of Goods & Services

As we all know, President Trump imposed tariffs on imports from China back in 2018. In turn, China put its own tariffs on U.S. imports. The idea behind imposing these tariffs came from Trump’s belief that international trade was unfair to America, and that it was time to return to the manufacturing of products here in the U.S. 

Image Highlighting - Prediction 13 Tariffs Will Impact the Cost of Goods and Services

The coronavirus proved this to be true when the U.S. ran out of important medical supplies that we would normally import from India or China. 

While tariffs are meant to punish China, they also hurt American consumers who have to pay more for those imports.  These tariffs have increased the cost of some building materials, which in turn, have driven up the cost to build even further. 

With the results of the presidential election becoming more clear, Biden’s administration could make changes to the tariffs imposed by the Trump administration. The question is, what changes?

At the same time, Biden has proposed plans for the manufacturing and production of essential products, like medical equipment, battery-powered vehicles and parts for 5G telecommunication to be “Made in America.” 

Whether tariffs are lifted or not, we can expect more jobs here in the U.S. as a result of this new awareness that America should not be so dependent on other countries for the essential things we need. And because labor costs are higher in the U.S., this shift could be inflationary as well.

4 Bonus Predictions: How Biden's Presidency Will Impact the Housing Market in 2021-2024 (and potentially 2028)

For those of us in the real estate industry, a big question on a lot of our minds has been how the next president might impact the housing market. President-elect Joe Biden will officially take over the Oval Office in January of 2021. 

Earlier this year, he announced a $640 billion housing plan. We could see the following changes to the real estate market over the next four-plus years under the Biden administration. 

How Biden's Presidency Will Impact the Housing Market in 2021 Through 2024 Infographic

Biden Prediction #1 - More American’s Could Become Homeowners

One of President-elect Biden’s initiatives is to make housing more affordable for more Americans –especially first-time homebuyers. The First Down Payment Tax Credit is Biden’s plan to help people buy their first home. First-time homebuyers may receive a tax credit of up to $15,000 for the down payment of a home. Plus, the tax credit will be issued when you buy the house–not when you file your yearly taxes. 

This would make it a whole lot easier for people who may not have enough money to come up with a down payment on their own, to have the ability to buy a house. This could also be a big deal for many young people with too much student loan debt to actually be able to afford a house. Owning a house is said to provide more financial stability than renting. If this plan comes to fruition, there would be further demand for housing.

The housing plan is also hoping to expand on the Good Neighbor Next Door program, which provides a discount to law enforcement officers, firefighters, EMTs and teachers willing to buy homes in ‘persistently impoverished communities’. The program is meant to help build communities that have been neglected and underfunded, as well as offer an affordable option for housing to public service workers. These types of workers living in areas of poverty could help rehabilitate and improve the value of homes.

Biden Prediction #2 - More Government Assistance For Low-Income Renters

Biden also plans to increase funds for federal rental assistance programs. A study by HUD showed that three out of four households that qualify for rental assistance do not receive it because these programs are underfunded. With a fully-funded program, Section 8 vouchers would be issued to eligible households to help cover the cost of housing. 

A new tax credit may also be issued to aid low-income renters. This tax credit is intended to help reduce the cost of rent and utilities to no more than 30% of one’s income. This money is designed to assist individuals and families who may not qualify for the Section 8 voucher but are still struggling to cover rent. 

Biden Prediction #3 - Racial Discrimination in Housing Policy Reform

An analysis of mortgage rates from 2018 to 2019 showed that interest rates were 13 basis points higher in predominantly black communities compared to predominantly white communities. 13 basis points is the difference between an interest rate of 3% and 3.13%. While this may not seem like much of a difference, in the long run, it makes a big difference. 

There is less wealth and lower homeownership rates in predominantly black communities. Biden intends to address the racial housing gap by making a national standard for appraising homes to ensure consistency across the board and a public credit agency that considers rental payment history and on-time utility payments. The purpose of these policies and initiatives is to give minorities more housing opportunities when they may have been previously discriminated against. 

It’s looking like we will see a rise in construction for affordable and Section 8 Housing in the coming years. Find out if Section 8 housing is a good or a bad thing for landlords.

Biden Prediction #4 - More Tenant Protections

There could be additional protections for tenants and not as many for landlords. Eviction protections and resolution options instead of evicting are initiatives that the President-elect has talked about enforcing. 

11 More Housing Market Predictions for 2022, 2023, 2024 & 2025

Looking for a real estate forecast for the next 5 years? You’re in luck. This is the only article on the web that includes real estate market predictions beyond 2022. And we go even further than that, outlining our predictions through the year 2025!

Here are my top 11 predictions for the housing market for 2022, 2023, 2024 and 2025:

  1. Low mortgage interest rates through 2021
  2. Home prices should continue to rise in many markets
  3. Homeowner demographics will change
  4. There will be tight inventory across the country
  5. There will be fewer home sales during recessions
  6. iBuyers will be on the rise
  7. Home buying and selling will go virtual
  8. There will be fewer real estate agents by 2025
  9. The real estate agents who remain will offer more services
  10. There will be a wider access to data than ever before
  11. Climate change could increase the price of owning a home

11 More Housing Market Predictions For 2022 2023 2024 2025 Infographic

2022-2025 Prediction #1 - Low Mortgage Interest Rates Through 2021

Many experts are predicting that mortgage interest rates will stay around 3% until the end of 2021. Rates could stay low even beyond 2021–but should fluctuate a bit as interest rates tend to do. With President-elect Biden entering the White House this January, some experts are predicting slightly higher interest rates over the next few years. 

For those that currently own real estate and haven’t refinanced, there’s still a good opportunity to do so in 2021 at today’s very low rates. It’s also a great time to lock in low rates on investment properties to increase cash flows.

2022-2025 Prediction #2 - Home Prices Should Continue to Rise in Many Markets

Smaller cities are set to boom over the next five years. Today’s trends will likely continue as we rely more on technology and people can choose to live anywhere. These smaller markets offer affordability, safety, often better schools, more space, and the opportunity for home price appreciation.

2022-2025 Prediction #3 - A Change in Homeowner Demographics

Millennials will likely hit their home buying peak right around the year 2023. This is the largest demographic in the world. They are smart, tech-savvy, and eager to build a nest-egg. And contrary to initial projections, they are getting married and having children. The bulk of young and first-time buyers will be looking for affordable homes with backyards and plenty of space. 

Earlier this year, Redfin reported that the bulk of new homebuyers are now Hispanic Americans. This is causing the value of homes to rise faster in predominantly Hispanic neighborhoods than in predominantly white neighborhoods. 

Texas has the highest number of Hispanic homeowners compared to any other state in the U.S. Many cities in Texas have seen increases in home values, and this trend is expected to continue in the coming years as jobs continue to migrate to the South.

2022-2025 Prediction #4 - Tight Housing Inventory Across the Country

In order to meet demand, more inventory must be built and offered at an affordable price, but it takes time to build new houses, condos, townhomes, apartments, etc. 

The number of new residential construction starts increased for both privately-owned housing units and single-family homes compared to this time last year. While this is a good sign that more housing inventory is set to hit the market in the somewhat near future, it still won’t be enough to meet demand. There is no fear of overbuilding at this time, except in the high-end condo and multi-family sectors in some high priced markets that are now seeing less demand.

2022-2025 Prediction #5 - Fewer Home Sales During Recessions

There’s no question real estate values could fluctuate between now and 2025. No one can predict the future. However, at times of uncertainty, people tend to spend more conservatively and save their money. Believe it not, many people find themselves in a stronger position today due to increased cautiousness in spending.

It can also be a great time to invest in certain industries that are benefitting from the current economic, health and social climate. The COVID-19 pandemic is easy to use as our example. 

Consider what you’ve been doing since the “shelter-in-place” order was declared. Perhaps you’ve been watching more TV, shopping online, buying food at the grocery store and cooking at home, ordering take out, or maybe even drinking more. There’s also never been more emphasis on the value of the place we call “home”. This presents unique opportunities for investors willing to look outside of the box and take advantage of where people are spending their money today. They are still spending – just differently. Opportunities abound.

2022-2025 Prediction #6 - Rising iBuyers

Tech companies that buy and own homes are known as iBuyers. These iBuyers actually make offers on homes, buy those homes at a discount, sometimes fix them up, and then sell them to the public for a profit. 

iBuyers take the emotion out of home buying and selling. They can streamline the process and often close more quickly because they have a lot of cash. Lots of international capital is pouring into these tech companies, so we should expect to see this sector grow over the years.

2022-2025 Prediction #7 - Virtual Home Buying & Selling

The way consumers buy and sell homes has already changed since the onset of the Coronavirus and we expect that trend to continue and advance. By 2025, Goldman Sachs is predicting the Virtual Reality/Augmented Reality or VR/AR industry to be an $80 billion industry. All or most home showings will be done using VR/AR technologies. Home closings will be done via video conferencing. 

Essentially, the need to directly interact with humans to buy and sell a home won’t be as necessary. It’s already accessible to buy and sell real estate investments online. However, the use of VR just gives consumers and investors more information and tools to find the home or investment they’re looking for.

2022-2025 Prediction #8 - Fewer Real Estate Agents by 2025

As the world moves to a virtual landscape, it seems pretty likely that the demand for real estate agents will go down. As such, the cost of commissions will likely go down too. Agents will be edged out by iBuyers and other online services if they don’t adapt by finding ways to add value. Robots will find their way into our lives in many ways over the coming decade. The good news is that new human jobs will be created in the process, as history has shown.

2022-2025 Prediction #9 - More Services Offered By Real Estate Agents

If real estate agents want to stay relevant in the years ahead, they’re going to need to offer more services to customers. Offering additional services like financial advising, staging, marketing and high tech resources might be the only way for agents to stay in the real estate game moving forward.

2022-2025 Prediction #10 - Even Wider Access to Data

The Internet already provides endless information at the press of a button. This trend is only expected to continue and become more advanced every year. All of the information needed to make smart buying and selling decisions will be accessible to anyone looking for it. The key will be how to interpret the data.

2022-2025 Prediction #11 - Climate Change Could Increase the Price of Owning a Home

Our final housing market prediction is that climate change will make more of an impact on the real estate market in the coming years. The rising cost of fire and flood insurance is going to affect where home buyers and investors buy property. Owning a home in a flood or fire zone will be a lot more expensive in the coming years. And it may even become impossible to obtain insurance in these high-risk areas. Waterfront homes will come with a hefty price tag, but inland, driving distances from beaches could become even more valuable. 

What Factors Cause a Housing Market to Crash?

What Factors Cause a Housing Market to Crash InfographicBefore I answer the big yearly question: Will the housing market crash in 2021, and if not will it crash in the next 5 years… it’s important to understand what causes real estate markets to crash in the first place.

Firstly, it’s important to note that housing markets don’t just crash out of the blue. Over time, a variety of factors will start putting pressure on a market, eventually causing it to crash. 

Factors that cause a housing market to bubble are often:

  1. Low interest rates
  2. Rapid job growth, which increases demand
  3. Easy lending or inflation

When a market is experiencing a combination of these factors, a housing bubble may have formed and then could easily pop if one of the factors is removed. 

The housing market crash happens when:

  1. Interest rates rise too quickly
  2. Jobs disappear too quickly along with demand
  3. Loans suddenly become harder to get
  4. Or an economic slow down occurs that causes massive deflation

What is a Housing Bubble?

A housing bubble forms when home prices increase quickly and rise beyond affordability. It can start growing when there’s a lot of demand, coupled with the ability to buy. It can also form when there aren’t enough houses for sale on the market to meet demand, which creates competition and drives prices up. 

Housing bubbles basically mean that prices grow and grow, becoming less and less affordable to the average buyer. At some point, the bubble gets so big, it becomes out of reach for most people. Lack of affordability causes sales to slow as inventory grows. Prices begin to drop, and the air is slowly or very quickly let out of the bubble. 

This is good for buyers, and not so good for sellers. That’s why timing is very important, because you don’t want to be a buyer in a strong seller’s market or a seller in a strong buyer’s market.

You may also like: How To Determine If It’s a Buyer’s or Seller’s Market?

Some people confuse bubbles with natural growth. For example, prices rose fairly quickly in Dallas, Texas in the last decade but it wasn’t a bubble. People from the area who weren’t used to rising home prices feared that a bubble was forming and that it would eventually pop. It didn’t and probably won’t. 

Why? Because even though prices rose quickly, so did salaries. The average person in the area could still afford the average home or rent. Dallas was building one of the fastest-growing, most diversified economies in the world. Home prices were just trying to keep up with salaries. In 2014, when oil prices tanked, the Dallas market was barely affected. That’s because Texas has become a no tax income state, offering huge tax incentives to businesses that moved there. As a result, the area was no longer dependent on one industry. The rising home prices were just a “new normal” for the area.

On the flip side, North Dakota also saw home prices soar because the oil industry was booming at that same time. Unfortunately, when the oil crisis hit in 2014, thousands of jobs were lost and demand for housing nearly immediately disappeared. Prior to that, builders had been actively trying to keep up with demand. When demand disappeared, the market was flooded with new homes and no workers to buy or rent them. A housing bubble formed quickly and popped nearly as quickly because the area was dependent on one fairly volatile industry.

What Happens When a Housing Bubble Bursts?

When a housing bubble grows and pressure builds, the housing market is likely to crash when several factors come into play. For example, when interest rates rise, the economy slows. Jobs can be lost and demand decreases. This creates oversupply, thus a buyer’s market, and subsequently, lower prices.  

When that happens, the real estate market could crash or simply slow down a bit.  The question is, how do you know how bad it will be and how quickly it will recover? It really depends on how sustainable the growth was prior to the slowdown and how severe the factors are that caused the slowdown.

Excessive risk-taking and unsafe practices by lenders, buyers, borrowers, builders, and investors can push housing prices way too high. The higher the bubble, the bigger the crash. Supply will continue to rise in order to meet the initial uptick in demand. However, because home prices can get so inflated, demand can actually decrease due to affordability issues, while supply continues to increase.

With too many high priced homes on the market and not enough able buyers, prices will suddenly drop. And…pop goes the bubble. There are big bubbles in certain markets today, which we’ll discuss in a bit. But first, let’s take a look at the most recent and most significant housing market crash in modern times, which occurred in 2008. 

Finally, the BIG Yearly Question: Will the Housing Market Crash in 2021?

The short answer is no, we DO NOT expect there to be a housing market crash next year and other real estate experts we’ve spoken with have expressed the same opinion. Lots of demand and not a lot of inventory should persist through 2021 and beyond. New construction just can’t be completed fast enough to meet demand in the affordable price range.

When forbearance for mortgages runs out, it is more likely that lenders will offer a loan modification, moving the owed payments to the end of the loan cycle. Banks don’t want a  housing crash because it hurts them the most. They will work with the borrowers who were not at fault for losing their jobs and businesses.

There really is no such thing as a national housing market, even though we talk about it often. It’s like saying we have national weather, when in fact, it can be snowing in one area and sunny in another. 

Housing markets vary greatly depending on many factors. Some areas around the country might see home values fall, stay flat, or boom. We think the areas that will boom will be in parts of the Midwest and the Southeast, due to high affordability and job opportunities. 

There are several markets in the U.S where home prices are at their highest level ever. That’s because low interest rates have made these areas more affordable, even if prices are higher. This does not mean they are in a bubble. It just means that prices are higher than they have been, and maybe salaries are as well. It may also be that there is simply not enough inventory to meet demand, so those who can afford to pay more will. 

Tighter lending standards compared to the 2000s will help minimize the risk of a real estate market to become over-leveraged and crash, as we saw in 2008.  The loans that have been made over the past decade are solid, from borrowers with high credit scores, savings, and low debt.

Some say this will be the shortest recession ever, as things start to bounce back in 2021 once the vaccines are distributed and more jobs come back to the USA.

Will the Housing Market Crash in the Next 5 Years?

As mentioned above, we don’t expect the housing market to crash in 2021. We can, however, expect major changes over the next 5 years as technology evolves. 

Robots will take more jobs than Covid, so educating people on new technologies will be of high priority. Reno is a great example of this. When Tesla moved its battery facility to the Reno area, there were simply not enough local residents who knew how to work in that profession. As a result, Tesla helped to fund new classes at the local colleges and universities to train more people on their new technology. Job growth is phenomenal in the area, along with the demand for housing. 

History has taught us lessons about recessions, depressions, stock market crashes, housing market crashes and even pandemics. We can learn from the past to prepare for the future. One thing we know for sure is that the economy always fluctuates. 

Based on the simple economics of supply and demand, I DO NOT foresee a national housing market crash in the next five years. 

There are housing markets around the country that will get hit harder than others–particularly bigger cities. A dense population, expensive housing and a high cost of living is already driving people away from big cities and into smaller metros or suburbs that offer more affordability and a better quality of life. The key for real estate investors is to determine where people are moving and which markets are best for investing.

Conclusion

We hope that this deep dive into our housing market predictions for 2021 through 2025 gives you a solid understanding of what you can expect in the coming years. All in all, the future looks bright when it comes to real estate investing. The real estate market is not going to crash anytime soon and in many areas around the country there are still strong opportunities to buy affordable rental property that will cash flow and have the potential for equity growth too… if you understand when and where to buy. If you’re looking for help identifying markets and properties, we can help. Become a member of RealWealth. It’s free and signing up takes less than 5 minutes.

Share on facebook
Share on twitter
Share on pinterest
Share on linkedin
Share on email
Share on print

Looking to Invest in Real Estate? Become a Member of RealWealth to View Sample Properties Starting at $60k

Scroll to Top

Login to your account