Here’s the updated 2020 Housing forecast from realtor.com. In mid-December realtor.com released the annual 2020 housing forecast. Fast forward five months and it’s no surprise the numbers have changed. “We got derailed on the forecast as we expected,” realtor.com Senior Economist George Raitu explains.
The updated data forecasts shows “sales of homes to fall 15 percent in 2020 with prices flattening.” That’s compared to the original forecast of a slight home sales decline of 1.8 percent. Single family housing starts were expected to be up 10 percent for 2020, that number has dropped to a decline of 11 percent.
Raitu sums up the market. “Uncertainty is the key word for pretty much every aspect of the market for the rest of the year.” Key market fundamentals include baby boomers not selling, Millennials wanting to buy, affordable secondary markets and an unstable global economy. The upcoming Presidential election also plays into the uncertainty factor.
Realtor.com does forecast a short-term bump in sales for late summer and early fall due to pent up buyer demand, fear of the coronavirus diminishing and low mortgage rates. Another driver for a stronger third quarter is Millennials with families want to settle in new homes before the school year begins. Don’t expect an increase in sales to last into the fourth quarter though.
Expect to see buyers’ must-have list include a true home office and not just a desk area in the kitchen. “The demand to work from home will remain strong motivating buyers to look for a separate space for that home office,” Raitu observes.
As more companies like Twitter, Facebook and Google GOOGL? allow employees to continue to work remotely the need to live in high-priced major metro markets declines. “I see prices flattening in those markets while secondary smaller more affordable cities become more desirable,” Raitu explains.
Raitu points to Indianapolis, Fresno and Asheville, North Carolina. “These are desirable areas for families and with the popularity of Zoom meetings growing they become even more popular,” Raitu adds. According to Zillow the average the median home value in Indianapolis is $153,159.
One issue buyers will face in these markets is inventory constraints. Consider the number of new homes for sale was down 45 percent year-over-year in April. Sellers will continue to hold off on listing their homes given pricing challenges.
Even if buyers can find a home, they may not be able to secure a loan. Mortgage rates are forecast to drop to a historic below three percent. That’s normally good news for buyers. Today’s reality is lenders are increasingly getting tougher on qualifying criteria. In these uncertain times the remainder of 2020 looks to be on the rocky side for the country’s real estate markets.