U.S. Home Sales Could Reach $2.5 Trillion This Year –That’s Facebook And Amazon’s Value Combined–Brokerage Predicts.....Palash GhoshForbes Staff

Brokerage firm said on Tuesday that home sales this year could reach a record high of $2.5 trillion as low mortgage rates, soaring demand for larger properties away from cities and still tight inventory keep pushing up market activity, along with prices.

This $2.53 trillion forecast marks a 17% year-over-year gain from $2.15 trillion in 2020, making it the biggest annual percentage increase since 2013.

The $2.53 trillion figure is about equal in value to France’s gross domestic product in 2020; or about the same as the combined market caps of tech giants Amazon and Facebook.

By region, the South is expected to register the highest home sales this year, at $1.09 trillion, followed by the West ($696.3 billion), the Midwest ($422.6 billion) and the Northeast ($322.8 billion). The benchmark 30-year fixed mortgage rate was at about 3% on Monday, and has been steadily declining from a recent peak of almost 5% in November 2018.

CRUCIAL QUOTE
“Housing has all the factors in its favor: demand exceeds supply, [mortgage and interest] rates are low, it’s a hedge against inflation, and the [Federal Reserve’s monetary policies are] stimulative to the economy, interest rates, and risk assets,” Greg McBride, chief financial analyst at Bankrate.com, told Forbes. “Trees don’t grow to the sky and prices won’t continue to rise at this pace in perpetuity, but the good times can certainly keep rolling along given the favorable backdrop.”

The American real estate market has surged since the pandemic as record low mortgage rates and remote working arrangements have triggered the demand of millions of families for more spacious and cheaper accommodation away from urban areas. In tandem, a shortage of housing inventory had helped to boost home prices to new all-time highs.

Realtor explained home sales are mushrooming in the South as it has more vacant land on which to build, warm weather and has also attracted hordes of prospective homebuyers seeking affordability and space. Since the depths of the financial crisis in 2009, home sales in the South have almost tripled in value. "A lot of wealth from the coasts is shifting South," Redfin chief economist Daryl Fairweather said. "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." Andrew Kolodey, a Redfin real estate agent in Atlanta, Ga., noted, for example, that buyers are offering $50,000 or $70,000 over the list price in order to secure a home in the area. “We’ve never experienced this level of competition [before],” he added,

WHAT TO WATCH FOR
Fairweather added the 2021 housing market will be even more active than last year was. “Homebuyers have a better sense of what the future looks like," he said. "Employers are providing clarity on permanent remote-work policies, the economy is recovering and mortgage rates remain low. All of these factors mean that we'll likely see even more buyers enter the market this year and in 2022." In addition, if mortgage rates were to appreciably rise, that would likely slow down the climb in home prices – which could, in turn, lead to even more home sales, Fairweather added.

BIG NUMBER
$348,500. That's how much the median home sale price surged to in May, after soaring 21% year over year. As home sales increased, the price of homes has also reached record highs.But while Fairweather is concerned about expensive housing, he does not expect the market to crash, because these “sky-high prices are supported by the new reality of well-funded buyers who are often benefiting from newfound mobility via remote work.”

U.S. Home Sales Could Reach $2.5 Trillion This Year –That’s Facebook And Amazon’s Value Combined–Brokerage Predicts (forbes.com)