The Covid-19 pandemic has affected some industries adversely. The housing market has seen several shifts in the pandemic season. From few houses on sale to the issuance of moratoriums by various state laws, it begs for a keen eye to forecast where the housing market is headed. In this article, you’ll get the housing market predictions for 2020. Let’s dive in.
Pent-Up Purchases Will Spike Sales
Before the Covid-19 pandemic, the mortgage rates were already low, and supply was lagging. Clients who were ready to buy homes between March, April, and May still need houses. The terms for securing mortgages are even more favorable as mortgage rates have dropped significantly— currently at 2.9%.
The significant drop in the mortgage rates has seen mortgage applications rise dramatically. According to the Bankers Association, the first week of July saw an increase of 33% in mortgage applications compared to the same time last year.
Though the housing market is a volatile one, there is hope that pent-up purchases, low mortgage rates, and the growing desire by millennials to own homes will lead to a spike in sales.
Home Sales Rebounded in June
After the dip in sales that occurred earlier in the year as a result of the pandemic, June saw home sales rebound significantly. According to the National Association of Realtors, the sale of existing homes rebounded by 20.7 % in June.
The rebound in sales spans across different types of property from single-family homes, condos, and townhomes. Interestingly, first-time buyers accounted for 35% of the sales in June—a good sign that the millennial demand for homeownership can fuel home sales considerably in the coming months. Second-time homebuyers also rose to the occasion, buying 9% of the existing homes in June.
Home Prices Have Hit A Record High
Though the year began with a dip in sales, house prices haven’t gone down an inch— it’s been rising steadily. June saw the rise in the median in existing-house prices increase by 2.8%. This is the highest it has ever risen.
The fact that the price of houses has been on the rise for 100 months straight is a clear indication that the housing market could flourish significantly after the downturns caused by the pandemic.
The Demand for Homes Will Rise Post Pent-Up Purchases
Currently, the demand for homes has risen beyond what the market supply can satisfy. Thanks to low mortgage rates, which lure the renters to purchase— the low monthly mortgage is attractive, especially to first-time buyers.
Though experts agree that the demand will come down after the pent-up purchases, research indicates that the millennial demand for homeownership keeps growing, and that can sustain the industry through uncertain times.
More Supply Brews
Low inventory has created a predicament on both sides. Homeowners are enticed to sell, expecting top dollar for their home, but given the low supply on the market, finding their next home has created a problem in itself. Even though the demand is high, people may hold off listing properties for sale.
However, more supply looks promising as homebuilders’ sentiment has risen to 72%. That’s the highest it has ever been since 1999.
Also, most states classified construction as an essential service, and that has seen most builders proceed with the work. The development of new homes will ease the pressure and shake the market for upgrades.
Research by Meyers indicates that 5% of construction firms hired more workers in May. Homebuilders that took a break are resuming work, and that’s a good sign for America’s housing market.
In conclusion, the housing market might have suffered the ravages of the Covid-19 pandemic. However, these predictions point to a promising future for the housing business in general.