Real estate market experts were optimistic of an extremely hot seller’s market in 2020, but then along came the coronavirus pandemic.
“We are in uncharted territory,” Caleb Liu, a real estate investor and owner of House Simply Sold, told The Mortgage Reports. He said that some homeowners may be forced to sell due to economic damage caused by the pandemic, which would mean an increased housing supply. "And when the inventory goes up, prices fall,” Liu said.
As such, we could well see a buyer’s market instead, some experts say.
“The economy is still relatively strong,” said Rajeh Saadeh, a real estate attorney. “And the buyer pool this year will likely be smaller due to job and income loss. Those factors can help give buyers the advantage.”
Buyers may also be enticed by the current low mortgage rates. According to the National Association of Realtor’s director of forecasting Nadia Evangelou, the monthly payment for an average home falls by $150 when rates drop from 4% to 3%, which is exactly what has happened in recent weeks. And when it comes to high-end properties, the drop translates to a monthly payment reduction of several hundred dollars.
But the buyer’s advantage may be wiped out by the current lack of housing inventory and home prices that refuse to budge, other economists note.
“I don’t think the coronavirus will change the dynamics in the real estate market and give the upper hand to buyers,” Evangelou told The Mortgage Reports. “A market favorable to buyers can happen when there are more homes for sale than there are buyers in the marketplace. And right now, we have a housing shortage.”
Experts say a balanced housing market needs a five to six month supply of homes for sale, but at present, the market barely has a four-month supply.
That low supply is causing home price rises in many areas. Nationwide, the number of existing single-family homes listed for sale jumped 8% in March compared to a year ago, according to NAR data. There’s also less concern about foreclosures impacting the market too, as the government has put in place a moratorium on evictions during the COVID-19 pandemic.
As such, Evangelou said he expects the housing market and prices to remain stable for the rest of the year.
“That’s due to the pandemic-induced reduction in inventory and less immediate concerns about foreclosures,” she said. “Potential buyers and sellers are indicating they may simply delay the process for a couple of months. But coming to 2021, prices are expected to rise 3% to 5% because of pent-up demand.”