In 2020, we’ve seen a global pandemic, skyrocketing unemployment rates, and emergency legislation designed to keep renters and homeowners in their homes.
It’s only natural that we’ve also seen a rise in predictions about what will happen with the housing market in 2021. In fact, even before the novel coronavirus struck America, experts predicted a housing crash on the horizon.
Will we be seeing a 2021 housing market crash? Or won’t we?
Below, we’ve compiled the opinions of many notable experts in the field.
Notable YouTubers & Their 2021 Housing Market Crash Predictions
A quick search on Google or YouTube for “housing market crash 2021,” and you’re met with a number of different takes. Let’s take a look at what some prominent YouTube real estate brokers and investors have to say about a potential housing market crash next year.
Ken McElroy Predicts a Housing Crash at the End of 2021
In his video Housing Crash 2021, Ken McElroy explains in detail why he thinks we’re in store for a housing market crash within the next year.
To him, three factors affect home values: interest rates, income stability, and inventory.
Interest Rates: McElroy predicts interest rates will remain historically low since the Federal Reserve cut interest rates to around 0%, so for the time being, they aren’t worth focusing on.
Inventory: Inventory is low, so prices are high. Once coronavirus housing relief measures expire, millions of out-of-work Americans will face evictions and foreclosures. Eventually, that means more houses on the market. A high supply drives home prices—and therefore home values—down.
Income Stability: An increase in unemployment, low and stagnant wages, and uncertainty regarding future employment all lead to income instability. And, once unemployment benefits expire, people will have even more trouble affording rent or mortgage payments.
In a follow-up video from October 2020 called Why Haven’t Housing Prices Crashed Yet? – Housing Market Update 2021, McElroy explains that home prices have since increased by 9%, and 16% of all FHA loans are 60-days delinquent—that’s the highest amount ever. An estimated 30% of all renters aren’t paying rent on time. In his words, “Tsunamis happen after the earthquake. Lockdown was the earthquake.”
He predicts we’ll see recessions hit major markets first like Seattle, Chicago, New York, and Los Angeles. Then, we’ll see a ripple effect on other markets. It’s already starting in New York City. The Manhattan market is quickly on the decline with 31 months of inventory.
The increase in supply will drive down prices.
Minority Mindset: If the Housing Market Crashes, It Won’t Be Until 2023
In their video The TRUTH About The 2021 Housing Market Crash, this YouTube channel doesn’t pick a side, but rather compares today’s real estate market with the market we saw back in 2005 before the 2008 housing bubble popped. It proposes three potential outcomes that we could see moving forward.
Best Case Scenario: By 2021, the mortgage forbearance program is ending but the economy has recovered. People can resume payments because they’re no longer unemployed. We don’t see a rise in foreclosures.
Option 2 (Partial Crash): The forbearance program ends, so people need to pay their mortgage. However, the economy still hasn’t recovered. In this case, people don’t have jobs and can’t afford their mortgage, so foreclosure happens. In this scenario, there are still plenty of buyers, so the market doesn’t completely crash.
Option 3 (Full Crash): The same scenario as option 2 except home prices skyrocket so much that buyers can’t afford to buy a home. This causes the market to crash.
If option 2 or 3 happens, Minority Mindset predicts that we wouldn’t see the full effects until 2023 because foreclosing on, buying, and selling real estate takes time.
MeetKevin Predicts a 80% Chance that a 2021 Housing Crash Won’t Happen
In his video The Coming 2021 Housing Crash | Here’s How Bad, MeetKevin focuses on three main factors dubbed “the trifecta” that are the perfect storm to hurt real estate prices: an eviction crisis, leading to panic, leading to an inflation-induced crisis. He also gives odds to four potential scenarios that could play out.
Scenario 1 – 5% Chance: Congress acts quickly, providing rental assistance and stimulus, so an impending eviction crisis won’t happen. People won’t panic sell their homes, so there won’t be an inflation-induced home crisis.
Scenario 2 – 75% Chance: Congress acts slowly, so the eviction process for many renters starts. If this happens, we might not see a decline in home prices.
Scenario 3 – 15% Chance: Congress does nothing. Millions are evicted and homeowners—including landlords—start panic selling. This drops prices 10 to 15%, causing a slight housing crisis.
Scenario 4 – 5% Chance: Dubbed Armageddon, Congress does nothing, prices fall because of the eviction crisis, and people start panic selling. Interest rates go up, dropping housing prices. He states a 1% interest rate increase drops housing prices by 10%.
MeetKevin heavily anticipates that Congress will wait until after the eviction process starts—which is slow—before they take any action. Possible measures could include an eviction moratorium, rent and mortgage assistance, stimulus checks, or increased unemployment benefits.
Jason Hartman Doesn’t Expect a Housing Crash
In his podcasts and in his YouTube videos (Will The Housing Market Crash in 2021? Mark Moss Interview and Housing will NOT Crash in 2021 (Here’s Why)), Jason Hartman predicts that we won’t see a housing crash in 2021.
Jason lists a few explanations for this prediction, including that:
Mortgages have been underwritten conservatively by the banks.
Unemployment rates are high for certain segments of the population, but many people are doing great right now.
Regardless of national election outcomes, stimulus funds and government intervention relating to the coronavirus will continue, making it easier for Americans to pay their rent and mortgage
Before the coronavirus hit America, we were experiencing a housing shortage. As the coronavirus continues and even after it’s controlled, Jason predicts higher demand for housing.
Fannie Mae & Freddie Mac estimate that by 2023, we’ll see a housing shortage of between 900,000 and 4 million housing units.
Interest rates are very low right now to the point where a mortgage payment today for a median-priced home is about $650 cheaper than it was in 2016 (when you adjust for inflation).