The current pandemic-induced slump in home sales should even out by late summer and early fall — even if second waves of the virus could bring another downturn on its heels.
In its latest revised housing forecast, realtor.com predicts a rocky year for both buyers and sellers amidst the coronavirus pandemic. While the current period of buyer hesitation and fear should start rebounding by July, high unemployment rates and a potential second wave of infections may cause another market dip by the end of September. After a strong start to the year, total home sales are predicted to fall by as much as 15 percent by the end of the year due to COVID-19’s impact on the economy.
“The coronavirus pandemic has kept both buyers and sellers on the sidelines, preserving market balance, for now,” Danielle Hale, realtor.com’s chief economist, said in a press statement. “As cities and states begin the slow process of reopening, we’re going to see a see-saw recovery with ups and downs that will favor the nation’s secondary markets in the short-term.”
Affordability is predicted to improve somewhat. Mortgage rates are projected to fall to just below 3 percent by the end of the year while home prices could flatten and increase by only 1.1 percent.
That said, a lack of inventory on the market is a consistent problem that is likely to only get worse in the aftermath of the pandemic. Current inventory was down 45 percent in April while housing starts are projected to be down 11 percent.
As sellers hold off on placing homes on the market, buyers will be forced to compete for whatever is out there. This dearth of inventory may push some buyers to think up new solutions — like looking in smaller cities and secondary markets, buying homes with more land and putting down more money for a down payment.
“The pandemic is leaving an imprint on the fabric of American life, culture, and preferences which we could see for years to come,” Hale said. “After experiencing life under quarantine, many buyers are searching for affordability and greater space, which is driving demand out of the nation’s largest metros and into surrounding smaller towns.”