Over the past 7 months, the COVID-19 pandemic has taken a tole on people, businesses, and the economy as a whole. As a result, we’ve temporarily lost the ability to accurately predict consumer behavior in various markets. Real estate is no exception to this ripple effect, and now we must learn to navigate the industry without being able to accurately forecast houses. We’re all left wondering…what can I expect with future home prices?
There’s usually a formula used to help predict the future prices of almost any item: simply calculate the supply of that item in ratio to the demand for that item. However, in real estate, the demand for houses far exceeds supply. Although mortgage rates are low, the application cost to buy a home just rose to the highest level in 11 years . In addition, the supply on available houses on the market is scarce.
What do the experts think?
Some experts, however, don’t believe that the sudden surge of home buyers is sustainable. Ralph McLaughlin, Chief Economist at Haus, explained in their June 2020 Hausing Market Forecast why there is concern:
“The upswing that we’ll see this summer is a result of pent-up demand from homebuyers and supply-in-progress from homebuilders. 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.”
COVID-19, as well as other obstacles, have currently impacted the industry in an interesting way. It was widened the range of thoughts about the future of home prices. Mykmc.com provided 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
Here are 2 main takeaways:
- There is no real consensus among the experts.
- No one projects prices to crash like they did in 2008.
The bottom line
2020 has without a doubt been a year of uncertainty. However, we can be confident in knowing there are no predictions for a crash like the one experience in 2008. There is opportunity to buy or sell a home right now, and if you’re ready to take that step then lets get in contact!
