Before the pandemic hit this year, we were heading toward a busy spring season with strong economic indicators and buyers vying for a limited supply of homes. But with the pandemic sweeping across the country, we are now forced to reassess the year ahead.
According to realtor.com’s Chief Economist Danielle Hale, “COVID-19 has really dramatically changed the way the housing market is going to perform this year. We started off with the potential for the best year in more than a decade for sales. 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.”
The amount of home sales has fallen over the past couple of months as the pandemic has caused many people to reevaluate their original plans to buy, sell, or potentially even move with the threat of COVID-19 looming over their heads.
That being said, a revised forecast for 2020 by realtor.com® economists says home sales will rebound in the late summer and fall due largely to millennials eager to own a home of their own.
Real estate experts are also predicting that smaller markets, more affordable cities, and surrounding suburbs could be particularly active as people reconsider their attraction to city life during a pandemic.
Those following stay-in-place orders while stuck in small-confined living spaces in pricey cities may seek out smaller cities and suburbs where they can get more bang for their buck such as more square footage and possibly even a backyard.
“The experience of being at home for a long period of time has everyone rethinking their priorities,” says Hale. “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.”
The market will experience another downturn toward the end of 2020, according to Realtor.com. Sales of existing homes are expected to drop by around 15% this year compared with the previous year.
For home sellers, there is one statistic that should give some comfort – home prices still appear to be on the rise according to recent data from Realtor.com. In the week ending April 25, the median home list price increased by 1.6% annually – compared to the previous year.
The data comes from the country’s largest metro areas. Given the turmoil in other segments of the economy, this is a positive sign and could provide reassurance regarding the stability of the housing market for those considering buying or selling real estate.
While many buyers have been eagerly anticipating massive falling prices due to the pandemic, and unlike anything we’ve seen since the Great Recession, history isn’t likely to repeat itself this time around.
The reason for this is the number of homes on the market has fallen by about 45% in April along with the demand from buyers. The current market is not experiencing an excessively abundant supply of homes for sale driving prices down, as sellers have been pulling their homes off the market. “Sellers don’t like to reduce their prices. So they decide not to sell,” says Hale.
Home construction is also expected to slow – fueling the housing shortage. The number of homes on which construction has begun is expected to drop by 11% in 2020. Before COVID-19 stalled construction sites in certain states, realtor.com had expected starts to increase by 10% in 2020.
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Tom Gilliam, REALTOR®
29630 Orchard Lake Rd.
Farmington Hills 48334
Email: Tom @ Homes2MoveYou.com