There’s good news and bad news for homebuyers and sellers in the pandemic’s wake, according to Realtor.com
Home sales have fallen and real estate listings dissipated as the COVID-19 pandemic made many buyers and sellers think twice about buying, selling and moving; home sales will rebound in the late summer and fall – driven by millennials eager to own a home, according to a revised forecast for 2020 by Realtor.com’s economists.
But realtor.com also predicts the housing market will experience a second round of pain in the form of another downturn toward the end of the year.
“COVID-19 has really dramatically changed the way the housing market is going to perform this year,” said the website chief economist Danielle Hale.
“We started off with the potential for the best year in more than a decade for sales,” she said. “But we’re going to see ups and downs as the market grapples with an unsteady economy. This will affect buyers and sellers across the board.”
Sales of existing homes are expected to drop about 15 percent in 2020 compared with the previous year.
Realtor.com is anticipating 4.5 million sales this year, compared with 5.34 million last year.
The company’s economic team had originally forecast late last year that 5.25 million sales would take place in 2020.
“While many cash-strapped buyers have eagerly anticipated prices falling, triggering a real estate bonanza similar to the Great Recession, that’s not likely to happen this time around,” the site said.
It noted that the number of homes on the market has fallen by about 45 percent in April, and so has demand from buyers. There’s no glut of for-sale homes driving prices down.
“Sellers don’t like to reduce their prices. So, they decide not to sell,” says Hale. Instead, they just pull their homes off the market.
The median price for an existing home is expected to hold steady, rising by just 1.1 percent in 2020 over the previous year.
“Were it not for COVID-19, we probably would’ve seen prices rise in the 2-4 percent range,” said Hale, noting that even before the pandemic, available housing fell well short of demand, pushing prices up.
While record-low mortgage interest rates will offset some of the slightly higher prices, Realtor.com noted mortgages also are harder to obtain.
Another downside for buyers is that home construction is expected to slow, exacerbating the housing shortage.
Housing starts, or the number of homes on which construction has begun, are expected to drop by 11 percent this year.
Before the pandemic stalled construction sites in certain states, Realtor.com predict starts to jump by 10 percent in 2020.
The areas where buyers look may change too, it said.
“Those cooped up in small apartments in pricey cities may seek out smaller cities and suburbs where they can get more square footage and a backyard for less money,” Realtor.com said, noting areas with lower prices also may appeal to cash-strapped buyers.
“The experience of being at home for a long period of time has everyone rethinking their priorities,” said Hale, adding:
“People are recognizing space is more important, so they’re looking for more affordable areas where they can have more space at the same price.”