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Where Does The U.S. Housing Market Go From Here? Five Experts Share Predictions For The Rest Of 2020

Đã cập nhật: 1 thg 8, 2020

After an unprecedented first half of 2020, what could the next six months bring? Here is what five housing economists and experts anticipate. Getty

Mortgage rates are searching for a historic bottom. Home prices are inching up toward record highs. Home shoppers are looking for deals. Homeowners are weighing selling versus refinancing. A lot is going on in the U.S. housing market on the backdrop of an even messier national state of affairs. After an unprecedented first half of 2020, what could the next six months bring? Here is what five housing economists and experts anticipate.

Is it going to be a V-shaped or a W-shaped housing market recovery? Why?

Mark Fleming, chief economist at First American Financial Corporation, a provider of title insurance and settlement services: “It seems hard to deny that when one looks at many of the housing market statistics, a “V” shape is quite apparent. The main reason for the strong rebound is that factors existing before the coronavirus hit (lack of supply, low mortgage rates and a millennial demand for homeownership) have continued or even gained strength. Mortgage rates are even lower, supply is even tighter and millennials are still house hunting.”

Ralph McLaughlin, chief economist and senior vice president of analytics at Haus, a home equity startup:

“It's going to be a W shape housing market recovery for three reasons. First, we think there will be an initial rebound simply due to pent-up demand for home buying that would have otherwise occurred in March, April, and May but will simply be pushed to June, July, and August. But after that, we're not expecting new demand to replace it at comparable levels, which will lead to another drop in activity. Second, and I think we're seeing this already, is that the virus will make a comeback, which will lead to less demand for homebuying in the fall. Third, there's a possibility that we'll see a broader impact on housing demand if the federal unemployment insurance bonus runs out at the end of the month.”

Taylor Marr, lead economist at real estate brokerage Redfin:

“Most certainly a W, though the second dip is likely to be way more muted than the first. The initial impact was so deep, because uncertainty was extremely high. Financial markets and mortgage markets hate uncertainty, so they were impacted more by the initial shock. However, they, then, stabilized and have been recovering, which has helped housing recover as well. After the pent-up demand subsides past the middle of the W (where we likely are now), housing will return more to a steady state, but economic impacts continue to linger as cases surge in key states resulting in rolling back opening the economy.”

What housing indicators will trend up in the second half of 2020?

Todd Teta, chief product and technology officer at real estate data and solutions provider Attom Data:

“If prices continue to level off or go down, which seems likely given current economic conditions, home equity levels will also drop. At the same time, unless the economy races ahead, unemployment will remain high, which probably will lead to foreclosures rising after the moratorium is lifted on lenders pursuing delinquent homeowners with federally insured mortgages. (The moratorium is currently in effect until August 31.) Under the current scenario, the most likely thing to trend up will be foreclosures, whenever the moratorium expires.”

Fleming: “One absolutely clear beneficiary of the supply and demand imbalance in the market today will be price appreciation. We expect it to remain strong, even accelerate in many markets this summer. You can’t buy what’s not for sale. And buyers will likely feel pressure to escalate their bids to win the “bidding war” on homes that are for sale.”

Marr: “Home builders have been supplying more of the inventory. As the virus continues to spread, new construction is especially attractive to tour and build.”

What housing indicators might be slower to recover than others? Why?

Jeff Tucker, economist at real estate listing website Zillow:

“The incredibly limited supply of homes could keep a lid on home sales activity for the rest of the year. It’s hard to record a home sale if no one is willing to sell their home.”

McLaughlin: “We expect that some indicators are likely to follow a W, while others might follow a different path. We're expecting employment growth, home sales, price growth, and housing starts to follow a "W' pattern, which will give us several ups and downs, whereas we're forecasting refinance activity to be more waterfall shaped. Other indicators are likely to buck the trend. For example, we could actually see an uptick in the homeownership rate if renters are hit harder than owners.”

What will have to happen for more home sellers to come back to the market?

Fleming: “The challenge is that sellers are also buyers. About two-thirds of all home buyers are existing homeowners. What will it take for more existing homeowner buyers to come back to the market? Ironically, more supply! Housing is not like most goods. It has to be “better” than the one the potential buyer currently owns now, and when the supply dwindles, it becomes harder to find a better house and easier to just refinance and do a renovation instead. This fear of not being able to find something better, the fact that selling and moving is, let’s face it, a pain and costly, combined with the fact that one can refinance into an amazingly low rate. Why move?”

Marr: “Lower coronavirus transmission rates within a community will ease some health concerns of sellers, and continual reopening of the economy will ease concerns about job losses as well. The longer the pandemic keeps businesses closed, the more cautious sellers will be about their own financial situation. But it’s also an issue of lack of inventory, which makes this a bit of a chicken or the egg issue. Move-up buyers need to find another home before they decide to list, but there aren’t enough homes for sale as sellers aren’t listing as much (relative to buyers making offers).”

Tucker: “A lot of boomers were already sitting tight in their homes, and now it’s understandable that people would delay moving into nursing homes. The best hope for a source of new listings might be builders, who seem to be recovering confidence after pressing pause on construction during shutdowns this spring.”

Is the home-buying demand we are seeing today sustainable for the rest of the year?

Fleming: “No, it will tail off a little. When the virus hit and we all had to stay at home, the haircuts and restaurant meals missed were consumption never to return. But, home buying can be deferred. Part of the big surge in demand as stay-at-home orders have been lifted was the pent-up (at home) spring demand, which deferred until the early summer. So, I expect as that deferred demand works its way through, demand will cool down. But I still expect it to remain strong by historic standards. Our research shows that millennial demand for homeownership continues to gain strength, and is a strong demographic demand tailwind for the housing market.”