Here is what the experts have to say about the current situation and the effect on the housing market.
These are uncharted waters - it's a challenge to predict what impact the current shutdown may have on home values. Some buyers are hoping for major price reductions because the health crisis is straining the economy.
The price of any item, however, is determined by supply and demand, which is how many items are available in relation to how many consumers want to buy that item. You knew that, thank you for indulging me.
In residential real estate, the measurement used to decipher that ratio is called months supply of inventory. You may recall that I talked about this in the great recession we just survived. This terms refers to the number of months it would take to sell all the available homes if no new homes came on the market. A normal market would have 6-7 months of inventory. Anything over seven months would be considered a buyers’ market, with downward pressure on prices. Anything under six months would indicate a sellers’ market, which would put upward pressure on prices.
Going into March of this year, the supply stood at three months – a strong seller’s market. While buyer demand has decreased in the past month, the number of homes on the market has also decreased. The recently released Existing Home Sales Report from the National Association of Realtors (NAR) revealed we currently have 3.4 months of inventory. This means homes should maintain their value.
This information is consistent with the research completed by John Burns Real Estate Consulting, which recently reported:
“Historical analysis showed us that pandemics are usually V-shaped (sharp recessions that recover quickly enough to provide little damage to home prices).”
So, what are the experts saying?
Here’s a look at what some experts recently reported on the matter:
Ivy Zelman, President, Zelman & Associates
“Supported by our analysis of home price dynamics through cycles and other periods of economic and housing disruption, we expect home price appreciation to decelerate from current levels in 2020, though easily remain in positive territory year over year given the beneficial factors of record-low inventories & a historically-low interest rate environment.”
Freddie Mac
“The fiscal stimulus provided by the CARES Act will mute the impact that the economic shock has on house prices. Additionally, forbearance and foreclosure mitigation programs will limit the fire sale contagion effect on house prices. We forecast house prices to fall 0.5 percentage points over the next four quarters. Two forces prevent a collapse in house prices. First, as we indicated in our earlier research report, U.S. housing markets face a large supply deficit. Second, population growth and pent up household formations provide a tailwind to housing demand. Price growth accelerates back towards a long-run trend of between 2 and 3% per year.”
Mark Fleming, Chief Economist, First American
“The housing supply remains at historically low levels, so house price growth is likely to slow, but it’s unlikely to go negative.”
Houses are selling & all signs indicate that the market is steady and will remain so.
Contact me & I will help you navigate this new virtual buying & selling world. I've been using these virtual tools for yearsto help my folks achieve their goals, and I will use them to help you, too.
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