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The biggest risk to the housing market right now

It's not rising mortgage rates or a stock market correction

Now that we are heading toward the end of 2021, what can we say about the U.S. housing market this year? No question it has been another year of ups and downs with seemingly conflicting data, which could indicate a coming boom or a bust depending on how you decide to parse it. If we stick to the facts, however, we can glean a few important take-homes as to what risks the housing market faces for 2021 and beyond.

First and foremost, it is important to remember that more Americans are buying homes with mortgages in 2020 and 2021 than any single year from 2008-2019. If you are familiar with my work, this will not be a surprise. From 2008 to 2019 we had the weakest housing recovery ever, following a bust. Following these years of doldrums, in the years 2020 to 2024 we have the best housing demographic patch ever recorded in history.

These solid demographics for housing will provide stable, built-in replacement demand. Don’t expect a buying or construction boom during this period. Mature economies are like large ocean liners. They have limits on how fast they can maneuver and what they can and can’t do. This is why my line in the sand for total sales (new & existing homes) for the years 2020 to 2024 is 6.2 million. If new and existing home sales combined get above this number during these golden years then they will beat my expectations.  We had no chance of reaching this number during the years 2008 to 2019.

Based on our demographics, our two sweet spot years will be 2022 and 2023. During this time we will have a lot of people of first-time home-buying age that will need shelter. But housing demand won’t just be from millennials and Gen Z coming into home-buying age: we will also have our move-up, move-down, cash and investor buyers adding to the demand.

If you are in need of a good laugh, ask anyone who is claiming home sales are going to crash for their existing home sales forecast. Expect hilarity to ensue! Remind the joker that existing home sales under 4 million, even during the doldrum years, was a rare thing. Presently, and for the next few years, we just have a lot more people.

Demographic factors are removing some risk from the housing market for the next several years. As you can see from the chart below, ages 28 are 34 a massive group that will keep our economy moving  forward. …Article continued on HousingWire.com.

This article was originally published by HousingWire. The full article is available on HousingWire.com for HW+ Members.

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