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NAREE2021: Economists talk about the momentum of the housing market and the future of real estate

Lake Nona's Laureate Park where more than 600 homes were built between 2019 and 2020.
Scott Cook/Tavistock Development Company
Lake Nona’s Laureate Park where more than 600 homes were built between 2019 and 2020.

The real estate market is expected to have a dynamic response to what many consider a tumultuous couple of years brought forth by the pandemic and big shifts in consumer spending habits.

Frank Nothaft with CoreLogic, Lawrence Yun, chief economist with the National Association of Realtors, and John Worth, executive vice president at Nareit, had a chance to share data they’ve collected in their respective markets and how they believe the trajectory of the economy will take shape next year.

The housing market, specifically, was a major topic at the panel discussion at the National Association of Real Estate Editors 2021 Conference.

Both Yun and Nothaft reflected over the velocity of home sales that took place during the pandemic.

“Pre-pandemic [home sale activity] in hindsight was boring, Yun said. At first, he explains, sales plunged down, then when the economy reopened, consumers eyeballed record-low mortgage rates, expansionary monetary policies were put in place, and the pandemic led people to want larger spaces and work from home.

“Single-family home sales really surged,” he said. “Winter of this year looks to be one of the best winters for home sale activity in many, many years.”

Nothaft, CoreLogic’s executive chief economist, would agree, next year will keep with the momentum of this year.

In addition, he told audience members at the panel, he expects mortgage interest rates to rise gradually over the course of the next year, but still remain historically at very low levels.

“So mortgage rates go up a little bit, but still stay historically low,” he said. According to CoreLogic data, home sales are expected to rise a little bit more relative to the 2021 volume, putting the total number of national home sales, both existing and new, at the highest level in 16 years.

Price growth on the other hand is expected to moderate a bit. Yun and Nothaft believe a strong demand for homebuilding, anticipated resolve for supply chain issues, and the end of mortgage forbearance will put more homes on the market next year.

When there’s increased supply there’s less pressure on the prices to rise.

“In our projections, we have some moderation of demand, some increase in supply and moderating home price growth going forward,” Nothaft said. “We’ve had really robust, double-digit home price and single-family home rent growth over the last year.”

According to CoreLogic’s latest Home Price Index report, Southern states are projected to have the strongest home price appreciation. Data projects Florida will see 10.7% HPA from 2021 to 2022. Behind the state is South Carolina with 8.9%, Maine with 8.6% and Tennessee with 8.5% HPA.

What follows the price growth is moderation, Nothaft told GrowthSpotter after the panel. “Unless we see a double-digit rise in household income, I don’t see how we can maintain double-digit home prices and rent growth year after year.”

At the conference, Yun said he’s concerned about what’s going to happen to first-time homebuyers.

“When you have a situation where home prices are rising and homeownership is not, then you have a divided society between the haves and have nots,” he said. “Homeowners will enjoy the equity gains and renters will be paying higher rents and the dream of homeownership is out of touch given the affordability challenges.”

From left to right: Ralph Bivins, editor of; Jason Hidalgo with Reno-Gazette-Journal; 
Frank Nothaft with CoreLogic; Lawrence Yun, chief economist with the National Association of Realtors; and John Worth, executive vice president at Nareit.
From left to right: Ralph Bivins, editor of; Jason Hidalgo with Reno-Gazette-Journal;
Frank Nothaft with CoreLogic; Lawrence Yun, chief economist with the National Association of Realtors; and John Worth, executive vice president at Nareit.

Meanwhile, in the world of REITs, the economy gave favorable gold stars, in terms of returns, to portfolios focused on self-storage, data centers and infrastructure, which includes cell phone towers.

The executive vice president at Nareit said sector performance was the most interesting factor of the pandemic.

“Industrial, data centers and infrastructure is the digital economy,” Worth said. In real estate terms, these are the logistics facilities that are delivering goods, the data centers that are processing new orders, and then the cellphone towers that are picking up the signal from mobile devices.

“Today, these three sectors account for 40% of the market capitalization of the REIT index,” he said.

According to Nareit, REITS own anywhere from 10% to 20% of commercial real estate in the United States.

About 145 million Americans have REITs in their portfolios, primarily in targeting funds, 401Ks, and IRAs. REITs serve as the primary way Americans get commercial real estate into their portfolios.

At the end of November, REITs were up just about 29%, following a “tough year in 2020,” when REITs were down a little more than 5% for the year.

“Overall returns versus the beginning of February 2020 are up almost 21%,” Worth said. “So REITs, despite having exposure to some of the hardest-hit sectors of the commercial real estate space including retail and hotels, have recovered dramatically.”

This year REITs have raised over $100 billion, half in debt and the other half in equity.

Worth said one of the most surprising asset classes for this period was self-storage, with overall returns of more than 70%.

People staying home, and retrofitting guest bedrooms or garage units into home offices and gyms, created a strong demand for storage. “That coupled with a rise in home sales, which is a traditional driver of self-storage use, has created a tremendous amount of energy in the self-storage space.” Worth said.

Retail REITs are also showing signs of positive returns. Retail is up 10%, according to Worth. “As in-person shopping has come back, online shopping also continues to grow,” he said.

“Real estate’s fundamental purpose is to house economic activity, house our lives and house our economic activity,” he concludes. “It has to change with our economy and it is changing.”

Have a tip about Central Florida development? Contact me at or (407) 491-3357, or tweet me at @amanda_rabines. Follow GrowthSpotter on Facebook, Twitter and LinkedIn.