What Are We Hearing From Pundits About Future Home Prices?
Covid-19 and an economic recession has had significant effected on the nation these past few months. Because of the uncertainty in both situations, predicting how consumers will behave has been nearly impossible. For this reason, it has become extremely difficult to predicting home prices.
Typically, experts use a simple formula to forecast future price of any item: calculate the supply of that item in ratio to the demand for that item. With regards to the housing market at this time, demand for real estate far exceeds the supply or available inventory. Applications for mortgages to buy a home just spiked upward to the highest level in eleven years while the supply of available homes and condos for sale is at (or near) an all-time low. Generally speaking, this would typically suggest a vigorous appreciation for home values as we progress throughout the rest of the year.
Some pundits, however, are not persuaded the present surge of home-buyers is sustainable. Ralph McLaughlin, Chief Economist at Haus, explained in their June 2020 Housing Market Forecast the reason for worry:
“The upswing that we’ll see this summer is a result of pent-up demand from homebuyers and supply-in-progress from homebuilders that has simply been pushed off a few months. However, after this pent-up demand goes away, the true economic scarring due to the pandemic will begin to affect the housing market as the tide of pent-up demand goes out.”
What's Affecting Home Prices?
Covid-19 and additional challenges presently having an affect on the real estate industry have created a wide net of scrutiny regarding the future of home prices. Here’s a list of analysts and their projections, from the lowest depreciation to the highest appreciation:
CoreLogic: Year-Over-Year decline of -1.5%
Haus: Year-Over-Year decline of -1%
Zillow: Year-Over-Year change is forecasted to bottom out at -0.7%.
Home Price Expectation Survey: Decline of -0.3% in 2020
Fannie Mae: Increase of 0.4% in 2020
Freddie Mac: Increase of 2.3% in 2020
Zelman & Associates: Increase of 3.0% in 2020
National Association of Realtors: Increase of 3.8% in 2020
Mortgage Bankers Association: Increase of 4.0% in 2020
We can take-away two important points from this list:
*There is no true consensus among the experts.
*No one is forecasting a downward spiral or crash of home-prices as we say in 2008.
Whether you’re considering buying a home or selling a home, you should keep in mind that home prices will not change dramatically in 2020, even with taking into account all of the uncertainty we’ve faced so far this year.
The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. John Sabia, Coldwell Banker and Keeping Current Matters, Inc. does not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. John Sabia, Coldwell Banker and Keeping Current Matters, Inc. will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.