SantaFeToday.com Santa Fe’s Hometown News
By Varela Real Estate
The updated data for housing market predictions from various sources like Realtor.com shows that sales of homes will decline by 15 percent in 2020. The home prices would flatten out. That’s compared to the original housing market forecast of a decline of 1.8 percent in home sales. Single-family housing starts, which were expected to increase by 10 percent in 2020, are now predicted to decline by 11 percent.
That’s mainly due to vigorous social distancing norms and economic uncertainty has compounded this temporary restraint on real estate transactions. According to their statistics, the new listings have declined across the nation’s largest metros as sellers wait out the crisis. The positive forecast is that there is expected a short-term bump in sales for late summer and early fall due to pent up buyer demand, fear of the pandemic reducing, and low mortgage rates.
Realtor.com‘s recent report for June 2020 shows that with the opening up U.S economy, the key housing indicators have begun to turn around.
Yearly declines in newly listed inventory have slowed and listing prices have recovered after reaching their low point during mid-April. However, homes for sale remained on the market for more than two weeks longer than this time last year due to stay at home orders and new normal resulting from COVID-19 pandemic. Nationally, the typical home spent 72 days on the market in June, 15 days more slowly than June of last year.
Latest Forecast & Trends
As we know the pre-COVID housing market was remarkably strong. Now we’ll discuss how housing market trends and forecasts have changed after the impact of COVID-19 pandemic. These key housing figures and their forecast are changing every month depending upon the level of economic uncertainty caused by the outbreak. Some real estate market experts feel that the recovery has already begun as suggested by the housing market report of June. However, it will likely be gradual, and it will also be subject to the pandemic flaring up again in the fall season.
According to the National Association of Realtors®, overall sales decreased year-over-year, down 17.2% (4.33 million units in April 2020) from a year ago (5.23 million in April 2019). The national median existing single-family home price in the first quarter of 2020 was $274,600, up 7.7% from the first quarter of 2019. The national median existing single-family home price in the first quarter of 2020 was $274,600, up 7.7% from the first quarter of 2019 ($254,900).
Housing Sales & Their Forecast 2020 – 2021
Home sales generally pick up in the spring-summer season. People start shopping for new homes around Spring Break with the hope of moving over holiday weekends like Memorial Day weekend or moving during the summer when it has the least impact on their kids’ education. This is why housing market predictions always include an increase in sales between March and September. The federal government’s shutdown of so-called non-essential businesses put a hold on most real estate transactions. Renters are still able to get critical repairs like someone coming to fix a broken air conditioner.
Rent and mortgage payments may be deferred in some cases, but others continue to pay their bills so they don’t have to worry about a lump sum due in four months. But the shutdown intended to slow the spread of the coronavirus has stalled real estate sales. Transactions that were already underway were completed. And real estate agents are trying to shift to virtual home tours via panoramic pictures of every room and drone photography. US housing market predictions suggest that this will help some homes sell, but it isn’t enough to get people to sign the dotted line at the rate they used to.
After all, you can’t get home inspectors and appraisers out to properties during government-ordered shutdowns, and that’s essential to completing the real estate transaction. Capital Economics’ housing market predictions are that we’ll see a one-third decline in home sales for the summer of 2020. Fannie Mae is assuming that the economic shutdown will last through the summer season and spike in unemployment will drag on the housing market for the entire year. This is why Fannie Mae is predicting a 15 percent drop in home sales for 2020 over 2019 numbers.
Latest Update On Home Sales
The housing market & real estate activity has begun to see signs of improvement and growth. According to Lawrence Yun, NAR’s chief economist, “The outlook has significantly improved, as new home sales are expected to be higher this year than last, and annual existing-home sales are now projected to be down by less than 10% – even after missing the spring buying season due to the pandemic lockdown.”
Housing Prices And Predictions 2020 – 2021
With supply-constrained and demand boosted, house prices seem to rest on solid foundations during the Covid-19 outbreak. In 2019, the average home cost around 250,000 dollars. The general forecast is that home prices will fall through the end of 2020 before recovering in the spring of 2021. For example, Zillow housing market predictions show prices falling through the fall of 2021. They expect to see home prices recovering in 2021. US housing market predictions for 2021 say prices to remain unchanged year over year at best. The decline in sales is projected to be accompanied by a flattening in price growth. With the supply of available homes continuing to balance, and the entry-level demand expected to remain strong.
Realtor.com‘s National Housing Forecast shows that prices are expected to increase by 1.1 percent in 2020. Before COVID-19 went viral, US housing market predictions for 2020 showed appreciation of roughly 1 percent. Existing home sales were predicted to fall about two percent, while single-family starts were predicted to increase six percent. Many real estate experts do not predict a steep price declines in the next 12 months. Home prices are holding up to the decline in transaction activity. Price gains are reaccelerating as the mix of homes for sale appears to be reverting toward pricier properties.
Latest Housing Prices Trends
| In the first two weeks of March, the median listing prices were increasing 4.4 percent year-over-year on average. |
| The median list price on pending contracts in the four weeks through April 26 was up 2.6% from one year ago. |
| The April national median listing price was $320,000, up 0.6 percent year-over-year. |
| This was a further deceleration from the 3.8 percent year-over-year growth seen in March. |
| In the three weeks of May ending May 9, May 16, and May 23, the median national listing price posted an increase of 1.4 percent, 1.5 percent, and 3.1 percent year-over-year, respectively. |
Housing Market Inventory And Its Forecast 2020 – 2021
The economic fallout from governments’ decision to temporarily close business activity mid-March of this year has reverberated through housing markets. Due to severe restrictions, buyers and sellers curtailed their activity, leading to a massive drop in home sales and new listings. Housing inventory dropped sharply in April and continued shrinking in May. In turn, contract signings and sales of existing homes plunged by double-digits.
US housing market predictions for 2020 project that newly built homes will be slow to sell. Existing homes are slow to sell, too. And this sentiment is found across the housing industry. The builder confidence index saw its largest ever recorded a drop in March 2020. The National Association of Homebuilders index fell a record 42 points in April 2020 to just 30. An index of 50 or higher means homebuilders are optimistic.
That means home builders may finish projects they’re working on, but they are unlikely to start entirely new projects. Long-term, the coronavirus pandemic will constrict the housing supply. Construction is, in theory, essential. For example, plumbers and electricians could work in an unoccupied building and install infrastructure, assuming they’re far enough from each other. Unfortunately, social distancing rules did slow down new construction.
Buyers and sellers still managed to work through the process even with social distancing constraints, but the limitations are taking a toll on the real estate activity. Sellers are still reevaluating or postponing sales rather than wading into the current uncertain housing market. The housing inventory continues to decline at a faster rate than the previous month.
Housing Demand And Its Forecast
Housing market predictions that take Covid-19 into account have already come out. Capital Economics is estimating four million homes will be sold in 2020. This would be the lowest rate since 1991. For comparison, roughly 5.3 million homes sold in 2019.
The trade war with China threatened international trade, creating a cloud that deferred business investment. Now we’re looking at a certain economic downturn due to the government’s choice to close the vast majority of businesses, nearly killing the service economy.
Experts think that the economic cost we’ve paid to try to contain the virus will weigh down the economy into 2021. That is why home sales are expected to be jump to around six million in 2021.
The federal government has dropped interest rates in an attempt to stimulate the economy. We can expect a wave of mortgage refinances in order to save money. Fannie Mae predicts 40% more mortgage refinances in 2020 than 2019.
Latest Update On Housing Market Inventory (June 2020)
According to Realtor.com, on the existing supply front, the total number of homes available for sale continued to decline in June as well.
- Nationally, inventory decreased 27.4 percent year-over-year, a faster rate of decline compared to the 19.9 percent year-over-year drop in May.
- This amounted to a loss of 363,000 listings compared to June of last year.
- The number of newly listed homes for sale also declined.
- Newly listed properties in June 2020 decreased by a significant 19.3 percent since last year.
- The rate of decline in newly listed properties has improved from a decline of 29.4 percent year-over-year in May.
- Housing inventory in the 50 largest U.S. metros declined by 26.5 percent year-over-year in June.
- This is acceleration compared to the 21.9 percent year-over-year decline in May.
Will the Housing Market Crash In 2020 or 2021?
The federal government has dropped interest rates in an attempt to stimulate the economy. We can expect a wave of mortgage refinances to save money. Fannie Mae predicts 40% more mortgage refinances in 2020 than 2019. To help borrowers and renters who are at risk of losing their home due to the coronavirus national emergency, the Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac (the Enterprises) are extending their moratorium on foreclosures and evictions until at least June 30, 2020.
The foreclosure moratorium applies to Enterprise-backed, single-family mortgages only. The current moratorium was set to expire on May 17th. Interest rates are already at an all-time low, which allows homebuyers who qualify. That gives potential home sellers hope, though it will take time for these low-interest rates to offset the spike in unemployment and general economic malaise.
According to the Bureau of Economic Analysis (BEA), the real gross domestic product (GDP) decreased 4.8 percent in the first quarter of 2020, according to the “advance” estimate released by the Bureau of Economic Analysis. In the fourth quarter of 2019, real GDP increased by 2.1 percent. Economic activity dropped at the largest annual rate since the Great Recession of 2008 in Q1, with consumers cutting back their spending on necessities.
Most of the loss occurred in the last three weeks of the quarter, as quarantine orders took effect, which underscores the severity of the pandemic’s impact. The decline in the first-quarter GDP was, in part, due to the response to the spread of COVID-19, as governments issued “stay-at-home” orders in March. This led to rapid changes in demand, as businesses and schools switched to remote work or canceled operations, and consumers canceled, restricted, or redirected their spending.
Personal saving was $1.60 trillion in the first quarter, compared with $1.27 trillion in the fourth quarter. The personal saving rate – Personal saving as a percentage of disposable personal income-was 9.6 percent in the first quarter, compared with 7.6 percent in the fourth quarter.
Disposable personal income increased $76.7 billion, or 1.9 percent, in the first quarter, compared with an increase of $123.7 billion, or 3.0 percent, in the fourth quarter. Real disposable personal income increased 0.5 percent, compared with an increase of 1.6 percent.
The full economic effects of the COVID-19 pandemic cannot be quantified in the GDP estimate for the first quarter of 2020 because the impacts are generally embedded in source data and cannot be separately identified. For more information, see the Technical Note on BEA’s Web site.
According to the U.S. Bureau of Labor Statistics, the total nonfarm payroll employment rose by 4.8 million in June, and the unemployment rate fell to 11.1 percent. These improvements in the labor market reflected the continued resumption of economic activity that had been curtailed in March and April due to the coronavirus (COVID-19) pandemic.
What will 2020 be like for buyers? As states continue to open up, mortgage rates trend at historic lows, and jobs recover. If you qualify for a mortgage, you have a more limited selection and prices close to what they were before the coronavirus hit, but you have relatively little competition. In response to the COVID-19 national emergency, borrowers with financial hardship due to the pandemic have been able to receive forbearance, which is a pause or reduction in their monthly mortgage payment. Borrowers can request an additional six months if needed. FHA does not require lump sum repayment at the end of the forbearance.
What will 2020 & 2021 be like for sellers? Expect homes to be slow to sell, and you may have to market it down to move it. Or you may need to wait a few months to see things shift from a buyer’s market to a balanced market. The only exception would be the “affordable” homes that are in short supply. In this case, you face a seller’s market as soon as people are allowed to go out shopping.
