SANTA CLARA, Calif.,
May 13, 2020 /PRNewswire/
-- Driven by pent up buyer demand and low interest rates, home
sales in the U.S. will rebound in late summer and early fall as
fears of the coronavirus begin to wane before experiencing a
downturn again later in the year, according to a revised 2020
housing forecast released today by realtor.com®. The
updated forecast finds that despite an uptick in transactions
during the third quarter largely driven by millennials, home sales
will be down 15 percent year-over-year.
The forecast also expects home prices to flatten nationally as
demand shifts to the secondary markets, which offer buyers more
affordability and space.
Housing
Metric
|
2020
Updated
Forecast
|
2020 Original
Forecast
|
2019
Actuals
|
Existing Home Sales
(million)
|
4.5
|
5.25
|
5.34
|
Existing Home Sales
YoY
|
-15%
|
-1.80%
|
0.00%
|
Existing Home
Prices
|
$275K
|
$274K
|
$272K
|
Existing Home Prices
YoY
|
+1.1%
|
+0.8%
|
+4.9%
|
Single-Family Housing
Starts
|
-11%
|
+10%
|
+1%
|
30-Year Fixed
Mortgage Rate
|
3.2%
|
3.5%
|
3.9%
|
According to realtor.com® Chief Economist
Danielle Hale, the path forward for
home sales will resemble a W shape with homes sales rebounding in
July, August, and September as fears of the coronavirus taper off
and buyers return to the market to make up for the lost spring
homebuying season before dipping again in the final months of the
year as virus infections spike again and the lingering impact of
the high unemployment rates are felt.
"The U.S. housing market started 2020 with substantial momentum.
With some of the best home sales and housing starts in more than a
decade, our biggest challenge going into the spring home-buying
season was a lack of for sale homes. The coronavirus pandemic has
kept both buyers and sellers on the sidelines, preserving market
balance, for now," Hale said. "As cities and states begin the
slow process of reopening, we're going to see a see-saw recovery
with ups and downs that will favor the nation's secondary markets
in the short-term."
Hale added, "The pandemic is leaving an imprint on the fabric of
American life, culture, and preferences which we could see for
years to come. After experiencing life under quarantine, many
buyers are searching for affordability and greater space, which is
driving demand out of the nation's largest metros and into
surrounding smaller towns."
The updated forecast projects mortgage rates to drop to new lows
below 3 percent by the end of the year, primarily driven by an
accommodating Fed and tepid economic outlook.
Although rates will be favorable, the qualifying criteria will
be tougher than normal as lenders seek to mitigate their own risks
amid the unfolding economic uncertainty globally. The stricter
qualifying criteria will require buyers to have higher credit
scores in addition to more cash for down payments. Shopping around
for the best rates and terms will be particularly important over
the next year.
Home prices are projected to flatten, increasing just 1.1
percent for the calendar year and possibly registering small
declines by the end of 2020. With many sellers remaining on the
sideline and a decline in housing starts, inventory will remain
constricted. Under normal market conditions, prices would be
expected to skyrocket as inventory evaporates, but buyer demand is
expected to see-saw throughout the year as secondary waves of
coronavirus infections continue to spread throughout the U.S.
During these periods, sales are forecasted to take a hit as sellers
de-list properties and buyer demand abates.
Buyers will have difficulty finding available homes for
sale
Although qualifying for a loan will be more
stringent, finding a home for sale will still remain the largest
hurdle this year. The number of new homes for sale was down 45
percent year-over-year in April. However, with home prices expected
to remain relatively stable, potential home buyers should have less
competition from all cash investment buyers unlike the 2008
recession where they dominated the market.
Buyers should expect periods of very low inventory turnover,
especially if subsequent COVID-19 flare-ups occur, creating a 'what
you see is what you get' environment. In some areas, buyers may
find sellers leaning heavily on digital technology, such as virtual
tours, instead of hosting traditional open houses. Determined
buyers may need to be prepared to pull the trigger on a home sight
unseen.
Sellers will take a step back from the market
Sellers
are expected to face their own array of challenges in 2020. A well
priced home would normally generate multiple offers, however, that
may not be the case this year. Many sellers, who will also be
subsequent buyers, will find the slower pace of sales and longer
time on market have made timing a sale and a corresponding home
purchase increasingly difficult compared to prior years.
A lack of new homes for sale this spring -- traditionally the
busiest time of year for real estate -- has signaled that sellers
have adopted a certain level of patience in listing their
homes.
Market Drivers
- Baby Boomers - Many Baby Boomers, who have already held
onto properties longer than expected, may decide to postpone their
home sale another year until things begin to normalize. This will
further constrict the number of homes for sale. The Baby Boomer
generation may see their share of home purchases dwindle in 2020 as
members of the generation step back from the marketplace.
- Millennials - Millennials will continue to be a dominant
buying force in the market. Because millennials are making home
purchases from a less discretionary perspective, they will continue
to grow their share of home purchases. Millennials are projected to
make up 50 percent of home purchases in 2020, but this number could
grow if older generations decide to step back from the market.
- Secondary Markets - Secondary markets throughout the
U.S. with resilient jobs markets could see greater than normal
demand as buyers continue to search for affordability and
additional space. As these markets heat up, we also expect to see a
change to the mix of homes available for sale nationwide. As the
mix of homes for sales shifts, we could see the national listing
price decline to reflect the change towards more affordable
homes.
- Election - The 2020 presidential election will continue
to be a wild card this year. Historically, economic strength is a
good predictor of how people will vote.
- Global Economy - The global economy will be key to watch
this year. The U.S. is heavily dependent on imports and exports, so
if the global economy is struggling, the U.S. will feel that
impact. As the U.S. and the rest of the world continue to fight the
COVID-19 pandemic, economic health here and abroad will be
extremely important.
EDITOR'S NOTE: The realtor.com economics team is
continually tracking the impact of the coronavirus pandemic on the
U.S. economy and housing market. The team's reports and analysis
are available here.
About realtor.com®
Realtor.com®
makes buying, selling and living in homes easier and more rewarding
for everyone. Realtor.com® pioneered the world of
digital real estate 20 years ago, and today through its website and
mobile apps is a trusted source for the information, tools and
professional expertise that help people move confidently through
every step of their home journey. Using proprietary data science
and machine learning
technology, realtor.com® pairs buyers and
sellers with local agents in their market, helping take the
guesswork out of buying and selling a home. For
professionals, realtor.com® is a trusted
provider of consumer connections and branding solutions that help
them succeed in today's on-demand world. Realtor.com® is
operated by News Corp [Nasdaq: NWS, NWSA] [ASX: NWS, NWSLV]
subsidiary Move, Inc. under a perpetual license from the National
Association of REALTORS®. For more information,
visit realtor.com®.
Media Contacts:
- Cody
Horvat, cody.horvat@move.com
- Lexie Holbert,
lexie.puckett@move.com
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SOURCE realtor.com