A “meaningful downgrade” for the real estate market?

Before you jump to any conclusions, the overall real estate market is on solid footing. In particular, the South Florida market continues to see high demand, price appreciation, and more Americans and companies relocating to paradise. So what does a “meaningful downgrade” for the real estate market mean? Well, this pertains to a recent forecast for 2021 homes sales announced by Fannie Mae. (To refresh your memory, the Federal National Mortgage Association, commonly known as Fannie Mae, is a United States government-sponsored enterprise.) Citing a continued tight inventory of existing homes for sale and new-home supply issues, Fannie Mae has decided to revise its guidance downward for the number of home sales for 2021.

Why the change in forecast?

Just one month ago, Fannie Mae predicted a 6.3% uptick in home sales for 2021. However, due to continued inventory constraints for existing homes and supply issues for new homes, the forecast for home sales this year has now been revised lower to 4.2%. According to the latest monthly forecast by economists with Fannie Mae’s Economic and Strategic Research Group, the current situation could fuel inflation and lead the Federal Reserve to adopt a more aggressive monetary policy stance.

Revised predictions for existing and new home sales

As of May 2021, Fannie Mae predicted existing single-family, condo, and co-op sales to grow by 4.8% versus last year. Now, these sales are predicted to grow by a more modest 3.1% to 5.81 million units. As for new home sales, the forecast given last month was for 16.3% growth. Now, the revised estimate calls for 919,000 new homes in 2021, which is equivalent to an increase of 11.8% from a year ago.


It should be noted that the recent home sale downgrades released by Fannie Mae do not reflect the fundamentals of the current real estate market. Rather, this downward guidance for sales is simply a product of the current environment consisting of a historically low inventory of homes for sale. Looking at the South Florida market in particular, the local economy is as robust as it has ever been with more Americans and companies relocating to the area. This growth is fueling the continued high demand and home price appreciation. Although new home construction can help alleviate the inventory constraints, supply chain challenges continue to present roadblocks.

Are you looking to buy or sell property in South Florida? Now more than ever, it is critical to have a qualified real estate team and the proper search tools behind you. At Live South Florida Realty, Inc., we have been a leader in the South Florida market for many years. Let our team of professionals assist you with buying or selling your piece of paradise today! In addition, our recently launched “Florida Home Search” app is now available on the Apple App Store and Google Play Store. With real-time MLS feeds, this app lets you set your own alerts to notify you as soon as a property meeting your needs hits the market. Furthermore, it will also let you know of recent closed sales in your area so that you may be even more educated on the market. Be sure to download this app for your smartphone or tablet today!

By natasha@livesouthfl.com

REALTOR® with Live South Florida Realty, Inc.