Will home prices drop due to the coronavirus? A new report from Fannie Mae reveals that US home prices are likely to hold steady and even see an increase in 2020, despite the pandemic.
US Housing Market Forecast 2020 and the Potential Impact of COVID-19
US Home Prices Will Increase
While talk of US home prices plummeting and an inevitable housing market crash due to the coronavirus have been making headlines online, we turn to the predictions from the experts at Fannie Mae. A new real estate market analysis for 2020 reveals that home prices may actually see an increase. Here are Fannie Mae’s price projections:
- The median price of an existing home is forecast to rise to $275,000, up from $272,000 in 2019.
- The median price of a new home is forecast to rise to $326,000 from $321,000 in 2019.
Although many sellers have already opted to pull their real estate listings from the market for fear of dropping home prices, this new report shows that those who need to sell may not have to worry. In fact, data from March 2020 shows that price reductions were actually down 1.6% YoY last month, even during the spread of COVID-19.
US Housing Inventory Will Drop
Of course, sellers pulling listings has only exacerbated the housing inventory shortage that the US real estate market was facing at the beginning of 2020. Even in initial US housing market predictions for 2020 pre-coronavirus, one of the main issues cited among experts was a shortage of homes for sale. Early forecasts saw this causing an issue for homebuyers shopping for affordable homes. This is likely to remain an issue in the US real estate market 2020 if the pandemic continues any longer.
US Home Sales Will Drop
Although US home prices may not take a hit, home sales are forecast to fall. Fannie Mae reports that home sales will drop by 15% in 2020. The share of this decline will come from falling sales of existing homes, with the report projecting a drop to an annual rate of 4.54 million units. This would be a significant YoY drop from 5.34 million in 2019.
Experts say the drop in homes sales will be driven by both the issues with supply and demand that the pandemic has introduced into the market. Sellers may be pulling listings but buyers are also likely to sit this spring buying season out. While some struggle with financial issues or job loss, others are simply waiting out the coronavirus before making any major financial moves.
A Buyer’s Market?
Although inventory is likely to remain very tight, the drop in demand from homebuyers is likely to cause a shift in the US housing market. Many areas across the nation have been trending toward a very competitive seller’s market for years now. However, these areas may see a quick change to a buyer’s market. With low mortgage rates and little pressure in the mortgage market, real estate investors who choose to enter the housing market in 2020 to purchase an investment property may be able to find what they are looking for with little to no competition.
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Learn More: Coronavirus Real Estate Updates: Is a Buyer’s Market on the Way?
US Housing Market Predictions 2021 and a Housing Market Recovery
While offering their US housing market predictions for this year, Fannie Mae also put out a preliminary forecast for 2021 – one that includes the likelihood of a housing market recovery. The company predicts that both the US economy and home sales will rebound in 2021. However, chief economist Doug Duncan, notes that this will all depend on how long the coronavirus will last:
The historically rapid decline in economic activity, the accompanying employment loss, and our limited, though improving, understanding of COVID-19 make this a particularly challenging forecast environment. The variability around this forecast is wide and is dependent on the incidence, severity, and duration of the virus, as well as the response of the public and policy makers to new information.
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