The economic downturn of 2020 took the world by surprise, as the pandemic swept across the globe. Housing, on the other hand, showed resiliency, allowing for stability and rising housing prices.
Buyers and sellers may find that now is the perfect time to enter the housing market. And experts agree.
Fannie Mae Predicts a Stronger-Than-Expected Recovery
Fannie Mae’s housing forecast was upgraded in August due to lower mortgage rates. The second quarter of the year was up in May and June, and this increase will lead to a better-than-expected recovery.
GDP contraction is expected to be 3.1% rather than 4.2%.
Pent-up buyer demand from the spring is expected to propel the housing market forward, with an increase in demand for the remainder of the year. Purchase volumes in 2020 are expected to be $1.3 trillion.
Mark Fleming: Expect a “V-Shaped” Recovery
First American Financial Corporation’s chief economist, Mark Fleming, notes that the market is experiencing a “V-shaped” recovery. The “V” indicates the market dipping and recovering. Fleming’s recovery expectations are on the back of:
Lower mortgage rates
Millennials still looking for homes
Tighter supply of homes
The housing market may be even stronger following the start of the year’s slowdown.
Redfin Expects a “W-Shaped” Recovery
Redfin’s Taylor Marr, a lead economist at the company, has a different view. Taylor states that the market is in a “W-shaped” recovery, meaning that there’s another expected dip in the market before it recovers and goes back to normal. Marr expects that the pent-up demand is driving the market and that the market will see a decline, albeit a lot less drastic than the first drop in the market.
CoreLogic Predicts a 1% Decrease in Home Prices
CoreLogic predicts that the housing market, through June 2021, will experience a 1% decline in prices. This has obviously not been the case in the Dallas/Fort Worth area. Previous forecasts suggested a 6.6% decline in housing prices. The revised forecast points to a better-than-expected market performance for the remainder of the year.
In May 2021, it’s expected that the market will begin to slow as more homes enter the market. COVID-19 has led many would-be sellers to hold off on putting their homes on the market. The result is lower inventory levels that are assisting the market and keeping housing prices high. This is definitely happening in the Dallas/Fort Worth area. CoreLogic expects that these sellers will cause an influx of sales to hit the market in mid-2021.
Haus Predicts a “W-Shaped” Recovery with a Longer Recovery
Haus has also recently updated their forecast for the economy with predictions that the W-shape will have more of a “wavy” recovery with ups and downs. Negative growth is predicted for all sectors but refinancing. The prediction is on the back of stimulus uncertainty.
Single-family home purchases are expected to decrease 20% to 30% year-over-year. Less severe downtrends are expected. It's expected that in October, the market will begin to decline again before recovering.
Home price forecasts are between –0.5% and 2.5% over the next eleven months. This is not the forecast for the D/FW housing market.
Overall, the experts are predicting that the market will go through a potential downtrend, although less severe than the first, before recovering and stabilizing next year.
I'll conclude with a reminder that these forecasts reflect the US economy and housing market and are not completely specific to our local market, which is already outperforming many major metro areas throughout the US. Our local market is strong because we still suffer from low levels of inventory and strong demand from home buyers. Are we immune from what is happening in the national economy? No, but what we have seen in the last two recessions is that our diverse economy helps keep us from dipping as low as other parts of the country. And because our lows are not as extreme, we typically rebound more quickly.