What 2021 Will Bring for Real Estate, Home Sales, and New Construction
While the real estate industry played a significant role in keeping the economy afloat during the pandemic, it appears that the construction industry may take on that role in the post-pandemic world. Or at least in 2021.
In a new home market forecast, Forbes notes that scarcity of homes for sale has created a logjam on the supply side and may result in a building boom as 2021 continues. In fact, the Mortgage Bankers Association (MBA) forecasts single-family housing starts to be around 1.134 million, with projections indicating projections could increase to 1.165 million single-family homes in 2022 and 1.210 million in 2023.
According to Builder Online, 2021 is expected to be another good year for housing. In addition to forecasting growth of 3.7% in single-family home sales, they are anticipating a 12.6% increase in single-family home construction starts in 2021. The forecast remains cautiously optimistic, however, as builders are facing a variety of challenges, including running out of lots, land prices, and new home affordability.
In its construction outlook for 2021, Electrical Contractor is expecting a bit of a roller coaster to continue within the industry through the remainder of 2021 and into 2022. Overall, however, they are predicting at least some economic improvement. Specifically, forecasts show residential buildings increasing 5%, nonresidential buildings gaining 3%, and nonbuilding construction improving 7% in 2021.
In Central Ohio, the 2021 construction forecast remains positive, anchored by a number of large projects. Columbus, specifically, has multiple massive, billion-dollar projects underway or set to break ground in 2021. These projects include work at data centers, the Ohio State University Medical Center Wexner Tower, Phase II of the Franklin County Jail, the Columbus Crew Stadium, and the Hilton Hotel expansion.
Similarly, home construction may be the answer to the robust demand for housing in Cincinnati that has far outstripped supply. Forecasts show that builders are ramping up construction after a lull earlier this year due to the pandemic, with permits for single-family home construction in the Cincinnati area expected to increase by 16% by the end of the year.
Record-low interest rates are at least partly responsible for the recent surge in demand for housing but are beginning to slightly increase, recently reaching a 14-month high. Nevertheless, buyer traffic remains strong, consumer confidence is at a post-recession high and prospective buyers have increasingly accumulated additional savings during 2020 due to lack of service sector purchases. Incredibly tight inventory of existing homes, however, suggests growth home construction in 2021.
Despite the seemingly endless ups and downs of the past year, it seems like the housing market will be settling back into normal as the year progresses. While it is expected that the housing market will stay strong in 2021, seasonal trends will normalize. Moreover, this year’s housing market will be much more hospitable for buyers as there is an increased number of existing sellers and new construction ramps up to restore some bargaining power for buyers, especially in the second half of the year.
At McSteen, we’re here to help with your next commercial or residential construction project. From site plans and topographic surveys to construction loan mortgage surveys and most recently, construction draw inspections, we’re here for you and your clients, every step of the way.
