U.S. Housing & Real Estate Market Forecast 2021

The US Real Estate Market is constantly changing and evolving, as does the opportunities it brings. Whether you are a real estate professional, new or seasoned investor or a potential homeowner, the following US map and market analysis will help you better understand the current landscape. Click on a state below to get started!

Select a State:


Key Takeaways:


The U.S. real estate market has experienced every end of the housing spectrum over the last decade. Almost ten years ago, the U.S. housing market bottomed out during the Great Recession. Today, well into 2021, the housing sector has made great strides. Despite the introduction of the Coronavirus, real estate appears to be firing on all cylinders. Most of the indicators used to analyze the U.S. real estate market suggest things are heading in the right direction—just in time for the “reopening” of the country.

As positive news on the virus front spreads, and businesses are phased back, the U.S. economy will persevere, just as it always has. Pent-up demand within the housing sector, in particular, should break through sooner rather than later. In addition, activity within the U.S. real estate market could very well serve as the catalyst the economy needs to live up to its potential. Demand appears to have remained intact, and an influx of buyers should help the market get back up to speed.

That is not to underestimate our current situation but instead suggest there is light at the end of the tunnel. As things currently stand, several obstacles need to be overcome, which begs the question: What does the current state of the American housing market mean for today’s investors? What does the real estate investing landscape look like for investors across the country, now and for the foreseeable future? Will the U.S. housing market crash in 2021?

The following provides an in-depth look at the current state of the U.S. real estate market and sheds some light on how investors may approach the rest of 2021.

Real Estate Market Overview 2021

  • Median Home Value: $287,148

  • Median List Price: $367,663

  • 1-Year Appreciation Rate: +13.2%

  • Median Home Value (1-Year Forecast): +14.9%

  • Weeks Of Supply: 6.6 (-9.6 year over year)

  • New Listings: 91,489 (+12.1% year over year)

  • Active Listings: 551,549 (-37.27% year over year)

  • Homes Sold: 83,821 (+52.1% year over year)

  • Median Days On Market: 16 (-20.70% year over year)

  • Median Rent: $1,189

  • Rental Vacancy Rate: 6.8% (+0.8% year over year)

  • Price-To-Rent Ratio: 20.12

  • Delinquency Rate: 4.7% (-1.8% year over year)

  • Unemployment Rate: 5.8% (latest estimate by the Bureau Of Labor Statistics)

  • Population: 328,239,523 (latest estimate by the U.S. Census Bureau)

  • Median Household Income: $62,843 (latest estimate by the U.S. Census Bureau)

The Top U.S. Real Estate Markets in 2021

The top U.S. real estate markets in 2021 are directly correlated to the new marketplace created in the wake of the Coronavirus. In particular, we are seeing a transition from larger, primary cities to smaller, secondary cities. Thanks, in large part, to new work-from-home trends, buyers are vacating the expensive confines of today's most expensive cities and trading living situations for more affordable alternatives.

The current landscape is shifting quickly, which begs the question: Where is the hottest real estate market in the United States? While answers may vary based on individual circumstances, the following markets can make a strong case for the best in the country:

  • San Jose, CA

  • Boise, ID

  • Seattle, WA

  • Phoenix, AZ

  • Harrisburg, PA

San Jose, CA

Despite the recent increase in telecommuting, San Jose remains the hub of some of today's biggest companies on the planet: Google, Apple, and Facebook (just to name a few). As a result, Silicon Valley's cornerstone is—and probably will remain—one of the most expensive metros in the country. Still, real estate in San Jose looks to represent an excellent opportunity for investors. While local home prices are exorbitantly expensive, they still represent a discount to that of San Francisco. If for nothing else, 2021 will most likely see more people trading their expensive San Francisco accommodations for the slightly more affordable (and larger) living arrangements in San Jose.

The demand resulting from the migration has created the perfect storm for local real estate investors. As recently as the first quarter of this year, San Jose home sellers realized some of the most significant profit margins in the country. With an average profit margin of 89.8%, San Jose has proven that there's still money to be made, even in today's most expensive markets.

  • Median Home Price: $1,211,844

  • 1-Year Appreciation Rate: +13.1%

  • 1-Year Appreciation Forecast: +24.5%

  • Median Rent: $2,886

Boise, ID

Of all the real estate markets in the country, few seem to have benefited from the pandemic more than Boise. At the very least, real estate in Boise has become a commodity. With a burgeoning tech sector of its own, Boise has garnered the attention of out-of-state buyers from just about everywhere. Millennial and Generation X workers have been flocking to Boise to take advantage of an up-and-coming city with relatively affordable prices. The activity that has ensued has made Boise one of the best places to invest in in 2021.

If that wasn't proof enough of Boise's rise to prominence in the investment world, only Nashville saw a larger increase in year-over-year profit margins from home sales. From the first quarter of 2020 to the first quarter of 2021, profit margins from home sales increased from 60.6% to 102.8%. More importantly, it looks like there's still room for real estate to run in Boise. Investors who get in now may enjoy a lucrative run over the next year.

  • Median Home Price: $472,634

  • 1-Year Appreciation Rate: +36.6%

  • 1-Year Appreciation Forecast: +23.3%

  • Median Rent: $1,543

Seattle, WA

The Seattle real estate market has been one of the hottest markets in the country for years, and 2021 won't be an exception. As the home of Microsoft, Amazon, Starbucks, and Costco, Seattle is attracting young, career-oriented Millennial and Gen X workers. As a result, these workers are expected to be the largest percentage of homebuyers in 2021, and well-positioned investors are set to reap the rewards.

The added attention in Seattle has increased home prices more than almost anywhere else in the first part of 2021. With home prices up 20% year over year in the first quarter, no other metro area with a population of at least 1 million people experienced a more significant increase. Due to the price increases, however, home sellers saw profit margins increase from 66.7% to 83.3% over the same period. The latest increases don't look to be a flash in the pan but actually appear to be secular trends as long as Seattle continues to draw in younger homebuyers from around the country.

  • Median Home Price: $831,953

  • 1-Year Appreciation Rate: +10.7%

  • 1-Year Appreciation Forecast: +18.0%

  • Median Rent: $1,858

Phoenix, AZ

The popularity of the Phoenix real estate market is the direct result of its ability to attract buyers of every age. Already known as a retirement haven, Phoenix has attracted older generations in search of lower costs of living, dry heat, and an abundance of golf courses. Still, many may be surprised to hear that Phoenix's growing technology sector is beginning to attract younger generations from all over the country. Not unlike every other city that made the list, Phoenix is attracting anyone and everyone who is seeking affordability. As a result, builders have been working hard to bring supply back up to pace with demand.

Of course, the influx of buyers has increased home values year over year. Phoenix was tied with Seattle and Philadelphia for the largest year-over-year increases in home values among qualifying metros in the first quarter. Similar to that of Seattle, the rise in home values has also increased investment potential. From Q1 2020 to Q1 2021, Phoenix's profit margins on home sales increased from 37.1% to 55.4%. Prices are expected to increase dramatically in the coming year, suggesting there's still room for improvement.

  • Median Home Price: $340,341

  • 1-Year Appreciation Rate: +24.6%

  • 1-Year Appreciation Forecast: +26.2%

  • Median Rent: $1,603

Harrisburg, PA

Another beneficiary of proximity to some of today's most prominent real estate markets, Harrisburg is an affordable alternative within driving distance of Philadelphia; Baltimore; Washington, DC; and New York. As buyers flee expensive cities searching for affordable living costs and are no longer forced to go into the office, remote working will enable Harrisburg to attract buyers from several major cities.

While the added attention has increased home values in Harrisburg, the average home price is well below the national average. The median home value in Harrisburg is 52.9% below the median home value in the United States. In conjunction with its proximity to some of today's biggest cities, Harrisburg's relative affordability will make it an excellent place for investors in 2021.

  • Median Home Price: $187,693

  • 1-Year Appreciation Rate: +16.4%

  • 1-Year Appreciation Forecast: +11.8%

  • Median Rent: $1,204

Median Home Prices 2021

The median home price in the United States has enjoyed historical appreciation rates for the better part of a decade. In the second quarter of 2012, home prices bottomed out at around $162,000. Since then, the median home value in the United States has increased for nine consecutive years, to the tune of 77.2%. Today, the median home value in the United States is now $287,148.

While the median home value has been increasing for quite some time, the most significant gains have occurred in the last year. New market indicators onset by the pandemic have created an environment conducive to rapid appreciation rates. In just one year, the average value of homes in the United States jumped 13.2%.

The first domino fell when the Fed decided to combat the fear and uncertainty onset by the pandemic with lower interest rates. By the end of last year, interest rates dropped to their lowest point ever, and buyers noticed. Fueled by government stimuli, pent-up demand, and the lowest borrowing costs anyone had ever seen, buyers came out in droves. Nonetheless, demand quickly turned into competition, and inventory levels couldn't keep pace with the influx of buyers. In a matter of weeks, sellers were receiving multiple offers on their homes and forced to increase prices accordingly.

Demand quickly turned into competition, and indicators in each of the country's four major regions reflected the increase in activity:

  • Midwest: Active listings dropped 50.0% from the previous year, median listing prices increased 8.6% year over year, and listings lasted on the market 16 days less than in the second quarter of 2020

  • Northeast: Active listings dropped 37.8% from the previous year, median listing prices increased 10.6% year over year, and listings lasted on the market 21 days less than in the second quarter of 2020

  • South: Active listings dropped 61.9% from the previous year, median listing prices increased 11.7% year over year, and listings lasted on the market 18 days less than in the second quarter of 2020

  • West: Active listings dropped 42.2% from the previous year, median listing prices increased 15.2% year over year, and listings lasted on the market 15 days less than in the second quarter of 2020

Prices rose everywhere, as demand greatly outweighed supply. Subsequently, more people could save money throughout the pandemic thanks to government stimuli and less spending.

The cost of homeownership has risen dramatically in a short period, which begs the question: Will house prices go down in 2021? The answer is most likely a resounding "no." Today's market leans too heavily in favor of sellers for prices to drop anytime soon. It's fair to assume prices will increase by as much as 14.9% in the coming year. Not only that, but prices will continue to increase as long as demand dramatically outweighs supply. Inventory is on the way, but it won't get here anytime soon, so there's a good chance the U.S. real estate market still has a lot of room to run up.

Median Rent Prices in 2021

The median rent price in the United States is somewhere in the neighborhood of $1,189. At its current price point, the national median rent tested new highs each month in the second quarter of this year. Following the latest increases, the average rent across the United States is now 5.4% higher than it was at this point last year. Perhaps even more importantly, rental rates across the country are now precisely where analysts predicted them to be before the pandemic even happened.

Throughout the pandemic, rental prices fell as more people quarantined and followed government-mandated "shelter-in-place" orders. Rental prices bottomed out towards the end of 2020 but have increased every month in 2021. It is important to note that the median rent in the United States hasn't only grown for six consecutive months but that the rate of growth is the fastest on record. To understand why rental rates have increased at such a rapid rate, it's essential to understand the correlation they share with home prices.

The median home value in the United States has increased for nine consecutive years (every year since they bottomed out during the Great Recession). However, the pandemic set several events in motion that accelerated appreciation rates over the last year. In particular, quarantine orders prevented national home builders from obtaining building permits and adding to the nation's already insufficient inventory levels. At the same time, homeowners pulled listings from the market due to the fear and uncertainty onset by COVID-19. As a result, the United States housing market only has about a month and a half of inventory on the books, which is about four and a half months shy of a healthy, balanced market.

In conjunction with pent-up demand, government stimuli, and historically low interest rates, the lack of supply created a seller's market, the likes of which we have never seen before. Simply put, there aren't nearly enough homes to satiate demand, and homeowners have increased asking prices based on the level of competition their listings have been receiving.

Therein lies the single greatest catalyst for today's rising rental prices: The unique combination of high home prices and insufficient inventory levels has relegated many would-be buyers to the rental pool (even those who can afford to buy have been forced to remain renters throughout 2021). As a result, demand for rentals has increased dramatically, and landlords have increased rents accordingly.

Despite broad increases on a national level, data points suggest a significant regional variation. While affordable, mid-size markets tend to see more growth in rental rates, expensive primary cities have seen the most significant pandemic-related declines because of secular work-from-home trends.

As more people were granted the freedom to work from home, larger, more expensive cities experienced a mass exodus. Without the need to live within close proximity to work, more and more people packed up and moved to more affordable cities, which would explain the differences in rent over the last year. As more people moved away from primary cities, vacancies increased, and rents dropped; as they moved to secondary cities, vacancies decreased, and rates went up.

States with the lowest median rent:

  • West Virginia: $796 (+1.93% year over year)

  • South Dakota: $844 (+5.65% year over year)

  • North Dakota: $848 (-2.09% year over year)

  • Iowa: $859 (+3.59% year over year)

  • Wyoming: $896 (+2.06% year over year)

States with the highest median rent:

  • Massachusetts: $1,609 (+0.46% year over year)

  • New Jersey: $1,633 (+4.76% year over year)

  • Washington D.C.: $1,728 (-7.82% year over year)

  • California: $1,820 (+1.27% year over year)

  • Hawaii: $1971 (+6.05% year over year)

U.S. Housing Foreclosure Trends & Statistics

According to Attom Data Solutions May 2021 U.S. Foreclosure Market Report, "there were a total of 10,821 U.S. properties with foreclosure filings — default notices, scheduled auctions or bank repossessions — down 8 percent from a month ago but up 23 percent from a year ago. Foreclosure starts, which represent the initial notice of default, grew by 36 percent year-over-year."

It is worth noting, however, that the latest year-over-year increase in foreclosures is unique. Foreclosures were artificially suppressed by government-mandated moratoriums and subsequent bills (the CARES Act), which were designed to help homeowners struggling with the financial ramifications of COVID-19.

"While the increase in foreclosure activity is significant, it's important to keep these numbers in perspective," said RealtyTrac Executive Vice President Rick Sharga. "Last year's numbers were meager due to the implementation of the foreclosure moratorium and the CARES Act mortgage forbearance program, so the year-over-year numbers look a lot more dramatic than they are. And May foreclosure activity actually declined compared to April."

States with the highest distribution of foreclosures (housing market 2021):

  • Nevada: One in every 5,535 housing units with a foreclosure filing

  • Delaware: One in every 5,854 housing units with a foreclosure filing

  • Illinois: One in every 5,903 housing units with a foreclosure filing

  • Florida: One in every 7,207 housing units with a foreclosure filing

  • New Jersey: One in every 7,679 housing units with a foreclosure filing

Metro areas with the highest distribution of foreclosures (housing market 2021):

  • Champaign, IL: One in every 2,420 housing units with a foreclosure filing

  • Peoria, IL: One in every 3,030 housing units with a foreclosure filing

  • Bakersfield, CA: One in every 3,774 housing units with a foreclosure filing

  • Mobile, AL: One in every 4,174 housing units with a foreclosure filing

As recently as May, the entire month saw approximately 1,315 properties get repossessed by their original lenders. Of the properties repossessed, the largest distributions resided in the following states (housing market 2021):

  • California: 154 properties were repossessed in May and completed the foreclosure process

  • Florida: 148 properties were repossessed in May and completed the foreclosure process

  • Illinois: 144 properties were repossessed in May and completed the foreclosure process

  • Texas: 83 properties were repossessed in May and completed the foreclosure process

  • Ohio: 70 properties were repossessed in May and completed the foreclosure process

Investing In The U.S. Housing Market

The current state of the U.S. real estate market is directly correlated to the impact of the Coronavirus on the housing sector and the Fed's response to mitigate a disaster. That said, the U.S. housing market is in a much different place than it was at the beginning of 2020. At the onset of last year, the housing sector was looking more and more likely to break records and usher in a spring selling season unlike any that had come before it.

Instead of realizing one of the most lucrative springs in recent history, however, the U.S. housing market suffered a significant setback. Fear and uncertainty surrounding COVID-19 prevented buyers from touring homes, sellers pulled their listings off the market, and mortgage underwriters closed their doors because of government-mandated "shelter-in-place" orders.

To stimulate the real estate market and prevent a total collapse, the Fed dropped interest rates to their lowest levels ever. The move catalyzed buyers, and pent-up demand encouraged prospective owners to participate in the market. It should be noted, however, that demand quickly turned into competition. The unique convergence of low interest rates increased savings from quarantine, and government stimuli created a feeding frenzy the market wasn't ready for.

In a matter of weeks, demand greatly outweighed supply. Owners were receiving multiple offers and eventually increased their prices accordingly. Over the last year alone, the median home value in the United States increased 13.2%; that's in addition to the decade of increases that preceded the previous 12 months. Simply put, the pandemic created an environment that favored sellers and sent home prices on an upward trajectory that has yet to ease.

The resulting high-price environment forced real estate investors across the country to reevaluate their exit strategies in 2021. Homes are simply too expensive, and profit margins are growing too slim to not at least consider an alternative to the wildly popular rehab exit strategy.

Due to higher acquisition costs, few foreclosures (due to moratoriums), lower profit margins, and even lower borrowing costs, today's investors are increasingly turning to building rental property portfolios. Access to affordable institutional money has enabled today's investors to simultaneously offset higher prices and increase monthly cash flow from properties placed in operation. With interest rates well below three percent, it's entirely likely for investors to pay down mortgages with other people's money and still pocket some profits each month, even in today's high-priced environment.

That is not to say rehabs and flips aren't viable in many markets across the country, but rather that the new U.S. housing market created in the wake of the pandemic is much more conducive to long-term rentals (and should continue to be for the foreseeable future).

U.S. Housing Market 2021 Projections

Forecasting the U.S. real estate market without an inherent degree of error is a fool's errand. No crystal ball can predict U.S. real estate market trends. However, it is entirely possible to read into existing trends and extrapolate data to make an educated guess. That said, it is pretty safe to assume the following U.S. housing market forecast 2021 will come to fruition:

  • Prices Will Continue to Rise: There isn't a single U.S. real estate market forecast that isn't calling for an increase in home prices. The median home value in the United States has risen for nine consecutive years. Today's median home value is approximately $125,000 higher than where it was at the depths of the recession in 2012. Over the last 12 months alone, the median home value has risen 13.2% due to increasing demand and a lack of supply. Despite recent increases, housing market projections suggest appreciation will persist for the foreseeable future. As long as unemployment continues to improve, rates remain low, and inventory remains tight, prices will rise in conjunction with a seller's market. Moving forward, the median home value in the United States could increase by as much as 14.9%.

  • Inventory Shortages Will Ease Slightly: The U.S. housing market currently has a little more than a month and a half of inventory, which is well below the six-month bar set by healthy, balanced markets. The county's severely deficient inventory level is the primary reason homes have appreciated so much over the last year. Fortunately, the economy is reopening, and builders can get back to work. As a result, inventory shortages will start to ease. Building permits are already up year to date, and they should continue to increase throughout 2021.

  • Millennials Will Buy The Most Homes: The U.S. real estate market outlook is strong, and millennials are a big reason why. Millennials have represented the largest share of home buyers for the better part of a decade, and the trend will continue into 2021 and beyond. Today, millennial buyers (ages 22 to 40) make up 37% of all home purchases. Moving forward, as "younger" millennials grow into their careers, it's safe to assume the share of buyers will lean even more heavily in favor of millennials. As a result, expect starter homes to represent a large portion of home sales moving forward.

  • Interest Rates Will Remain Low: Interest rates are up year to date. Still, with the average commitment rate on a 30-year fixed-rate mortgage resting somewhere in the neighborhood of 2.96%, borrowing costs remain historically low. Interest rates will remain low for the duration of 2021, but the Fed will increase rates as the economy strengthens. In a recent Fed meeting, Federal Reserve Chairman Jerome Powell reiterated that rates would remain low for at least a few more years. Still, even after the Fed makes its expected adjustments, borrowing costs should remain attractive.

  • Secondary Cities Will Receive More Attention: Today's median home value tests new highs each month as appreciation continues to run rampant. Nowhere else are prices more exorbitant than in primary cities like San Francisco and New York. That said, the latest work-from-home movement onset by the pandemic has enabled more people to leave large, expensive metro areas. The exodus out of larger cities will most likely result in an influx of buyers in local secondary cities. If for nothing else, secondary cities allow buyers to take on a lower cost of living while simultaneously avoiding larger crowds.

  • Investors Will Prioritize Rental Properties: While attractive profit margins remain across the country, they are growing harder and harder to find in select cities. As a result, a growing number of investors are expected to trade rehabs and flips for building out rental property portfolios. In addition to shrinking profit margins, historically low interest rates have made it cheaper than ever to borrow institutional money. Lower borrowing costs will simultaneously help investors offset high acquisition costs and increase monthly cash flow from properties placed in operation.

Of the housing market projections 2021 is most likely to realize, none may seem more evident than continued appreciation. However, it is important to note that these projects are just that; a forecast based on deductive reasoning. There is no guarantee any of these trends will come to fruition, but it is essential for investors to at least note the direction the market is heading. Doing so will enable forward-thinking entrepreneurs to be more proactive than reactive, making the difference between a good investor and a great investor.

Summary

The U.S. real estate market is better off today than it has been in recent history. While fear and uncertainty remain in the wake of the Coronavirus, it's important to remember that there are many positive indicators on the horizon. In particular, the economy is starting to show signs of life, and the U.S. unemployment rate is on the mend. As things begin to return to normal and the light at the end of the tunnel grows brighter, activity will pick up.

More importantly, builders will be more equipped to handle the influx of demand. With building permits on the rise, it's safe to assume an easement of the inventory crises will happen sooner rather than later. When builders can add to existing inventory sufficiently, the market will become more balanced and work in everyone's favor: buyers, sellers, and investors.

Despite the road ahead, however, the American real estate market boasts countless opportunities for real estate entrepreneurs looking to make a career out of investing. With the right systems in place, there's absolutely no reason anyone shouldn't be able to realize success as an investor in the U.S. housing market.

Have you thought about investing in the U.S. real estate market? If so, what are you waiting for? We would love to know your thoughts on the current state of the American real estate market.

*The information presented is not intended to be used as the sole basis of any investment decisions, nor should it be construed as advice designed to meet the investment needs of any particular investor. Nothing provided shall constitute financial, tax, legal, or accounting advice or individually tailored investment advice. This information is for educational purposes only.