Jeff Tucker, Zillow Economist, joined Yahoo Finance Live to discuss Zillow’s 2021 predictions for the real estate market,
ADAM SHAPIRO: We want to check something that we are paying attention to and that has to do with real estate because it’s been a good year for a lot of people, especially if they were selling in certain locales. Jeff Tucker, a Zillow economist, he’s joining us now. And it’s good to have you here.
I don’t want to say 2020 is a record year, but we haven’t seen appreciation like this since what, almost 14 years, 2006. Can we sustain it?
JEFF TUCKER: That’s right. The recent monthly price appreciation we’ve seen in the Zillow home value index is the fastest since actually the peak pace of appreciation back in 2006. The annual appreciation looking back over 2020 was a little bit more modest, about 7 and 1/2%, but we expect this to be sustained well into 2021.
There’s a lot of pent-up demand from people who kept trying to buy homes and were stymied this year partially because they sometimes had trouble finding a home for sale. There’s about 1/3 fewer homes on the market at any point in time in the last few months, and they’re still being driven by some of these fundamental factors of record low mortgage rates well under 3% still and just, actually, the fundamental forces of aging.
There’s a lot of people entering their 30s right now. There’s about 3 million more people, about 23 million versus 20 million 10 years ago, who are in the key age range of 30 to 34. That’s the age at which Americans tend to buy their first homes, and so they are really trying to come into the market, and I think a lot of them sort of accelerated that decision in part due to the pandemic.
BRITTANY JONES-COOPER: And Jeff, how much of that is people worried that if we have to undergo another lockdown or if there’s some problem with the vaccine that it’s best to try to find a new home, a bigger space because obviously, that makes staying at home a lot more manageable? But how long do you think that’s going to last? What about in the spring? What do you expect the housing market to be like then?
JEFF TUCKER: Yeah, that’s a great point. I don’t think that this was necessarily, you know, people overreacting or buying a house that’s way too big. I think this was sort of accelerating the choice that a lot of young people were going to make in the next few years. And now that they’ve bought that bigger house, they’re not going to turn around and sell it and try to downsize back into a smaller condo.
And you know, just once again, these demographics are hard to argue with. There are just millions more people in that key age range of 30 to 34. I do think in the rental market, there is some more space that has kind of been opened up. We only saw rent increase 1% this year, which is the slowest in ages.
And that’s partially due to folks moving out and buying the first homes. It’s also due to renters really struggling this year economically. But you know, put that all together, and it does mean that Gen Z, as they move out from their parents’ homes or move out from college, they could have an easier time getting their first place to rent in the big cities over the next year.
ADAM SHAPIRO: Well, the rents in New York City have fallen about 20, in some cases, a little bit more than 20%. I know an department upstairs here sold for 20% lower than list. So as Doris Day would have said in the 1950s, que sera, sera, what will be, will be. Looks like there’s opportunity, and people writing off cities is dead, but looks like with the prices dropping, there’s opportunity in the places people were fleeing.
JEFF TUCKER: Yeah, and I think this call of the death of cities was certainly overblown this year. I don’t think they are gone for good, but a lot of the things that made city living great– a short commute, the nightlife, the restaurants, the live entertainment– that’s all been shut down, but it won’t be shut down forever. So I think as employers bring employees back to their offices, this is probably a great opportunity for renters to get a good deal and really for home shoppers as well.
You mentioned New York City. That is one example, especially the Manhattan market, one place where we did see a buildup of unsold inventory. And some of those sellers may be willing to accept a bargain when they decide to sell their home. So if you’re shopping for a condo or townhouse, this may be a good opportunity to get a good deal. If you’re shopping for a detached single family home, get in line because there are millions of people trying to do the same thing. And prices are just going gangbusters in the single family home market.
ADAM SHAPIRO: Jeff Tucker is an economist with Zillow. We appreciate your joining us here and wish you and the team at Zillow a happy, healthy 2021.