no one could have predicted it not the economists not the real estate agents and especially not the nations homebuilders but a pandemic caused an emotional run on housing unlike any other now one year after the covid19 crisis shut down and warped so much of american life things are still unpredictable but the outlook isnt bright for housing in fact it looks like the perfect storm for a correction home prices are overheated mortgage rates are rising the supply of homes for sale is anemic and consumer confidence in the housing market is falling pandemicrelated mortgage bailouts are set to expire this summer a year ago home sales ground to a halt no one wanted to buy or sell or even enter a home given all the physical and economic uncertainty that covid19 brought but just a few months later housing hit the gas pedal and prices followed the frenzy was hugely emotional as the nation saw most aspects of daily life suddenly confined to its properties space became a major asset it was also fueled by very attractive mortgage rates which set more than a dozen record lows after plunging nearly 18 from march to april and another 10 from april to may sales of existing homes shot back up nearly 21 in june according to the national association of realtors americans unsure when they would be able to get back out in the world again were looking for more indoor and outdoor space they wanted dedicated rooms for working and schooling at home manufacturers of accessory dwelling units which are small backyard tiny houses saw demand triple people wanted additional space and yes some solitude from all that family time the strong demand for housing however came at a time when the supply of homes for sale was already low much of that was due to a stillslow recovery in homebuilding from the great recession when the pandemic hit sellers pulled back not wanting to let anyone in their homes nor to move themselves what followed were drastic changes in every facet of the market the homesales market will experience countervailing forces of the higher push from more jobs but also the pull back of higher mortgage rates said yun after the february employment report was released we will have to wait to see which force will be stronger yun noted that in 2018 the economy saw strong job creation but home sales fell because mortgage rates rose from 4 at the beginning of the year to 46 by the years end homebuyers have already lost considerable spending power to be specific a homebuyer loses 23250 in spending power with a mortgage rate of 325 versus a 275 rate according to a recent calculation by redfin these enormous gains have led some to claim the housing market is overvalued a recent report from fitch ratings claimed prices nationally were 55 overvalued slowing employment recovery and stillhigh unemployment levels are not supportive of longterm sustainable price growth wrote suzanne mistretta senior director at fitch ratings affordability has weakened substantially especially for firsttime homebuyers prices have risen most at the low end of the market where supply is leanest the homebuilders have also raised prices given higher demand and higher construction costs newly built homes have always come at a price premium but now about 75 million households roughly 60 of all us households are not able to afford a medianpriced new home according to a fresh calculation by the national association of home builders weaker affordability is the prime reason for a potential slowdown in housing this year sales are already slowing as mortgage rates rise given how much housing demand was pulled forward last year sales could be considerably weaker this year one bright side of higher prices however is higher home equity homeowners are house rich gaining a collective 15 trillion in 2020 according to corelogic thats an average gain of 26300 per homeowner since the fourth quarter of 2019 this equity growth has enabled many families to finance home remodeling such as adding an office or study further contributing to last years record level in home improvement spending said frank nothaft chief economist at corelogic for all the talk of an urban exodus the housing market in cities is as hot as weve ever seen it especially for singlefamily homes said daryl fairweather redfins chief economist there are plenty of buyers out there with deep pockets who are coming out ahead financially during the pandemic they want a house with lots of space while they are still working from home but they also want to live in a walkable area near urban amenities as shops and restaurants reopen home price growth in affordable cities like detroit cleveland and baltimore are far outpacing price growth in new york city and san francisco new york however is already seeing demand return sales contracts in manhattan for residential real estate spiked 73 in february year over year according to douglas elliman and miller samuel and the bargains are fading material prices especially for lumber have skyrocketed a shortage of skilled labor and a lack of buildable lots are ading to the cost pressures higher prices have added about 26000 to the construction cost of the average new home according to the national association of home builders as a result some builders including several of the nations largest are actually slowing production hoping prices will ease soon the number of singlefamily homes permitted but not started jumped 96 in december and was 28 higher than a year earlier according to the nahbs chief economist robert dietz it has exacerbated the housing shortage we estimate right now even with households that have been consolidating as young adults have been moving back with their families we still think we are at a deficit of roughly around 900000 units in the us in terms of what we need just to get back to normal in terms of singlefamily ivy zelman ceo of housing research firm zelman  associates said on a recent webcast from willy walker of walker  dunlop the outlook for housing in 2021 is mixed some sectors like singlefamily rentals should thrive while the forsale market is facing a bevy of headwinds affordability is no 1 on that list consumer confidence in the housing market fell in february according to the most recent monthly sentiment survey from fannie mae people think house prices will continue to go up as a result the share of consumers who say its a good time to buy a home dropped from 52 to 48 the share of respondents who think its a good time to sell also fell that is likely because they are concerned about buying another home when prices are so high and because they dont want to lose their low mortgage rate and trade it for todays higher rates fewer sellers will only exacerbate the supply crunch while very little is predictable anymore given the slow march to widespread vaccination and normalcy there is no question that americans attitudes toward their homes have changed all of these difficulties have bred innovation too technology in the home and inhome construction are both on steroids now this could well drive muchneeded changes for labor materials sustainability and resilience the pandemic drove a new desire for cleanhome technology homebuilders stepped up immediately one of the largest pulte homes announced several consumerinspired healthy features including wholehouse water filtration hospitalgrade air filtration antimicrobial quartz countertops and touchless faucets a recent pultegroup survey found that more than half of consumers 60 say the most important attribute in how their home can support them is health and wellness said john chadwick chief operating officer at pultegroup as a direct result of the pandemic consumers are seeking homes that will help them stay healthy another major builder lennar announced a new partnership with ring expanding its connected home features with everything from smart security and temperature control to products that alert the homeowner when there is a leak an entire suite of smart features can be put into the home during construction part of that was inspired by research that said homeowners were fine doing some diy projects but didnt want to have to have professional installers in their homes for more hightech products that sentiment was of course intensified by covid the housing shortage also jumpstarted the fledgling business of 3dprinted homes several companies are now jumping in with plans for whole 3dprinted communities one of them icon which had already printed a small community in austin texas for the homeless just completed its first forsale community in partnership with developer 3 strands we have more people asking for us to build houses than we know what to do with now every construction system we have is booked up for the next 24 months said jason ballard ceo of icon our company will more than double in size this year its every entrepreneurs dream