US Housing Market Forecast
The Corona Virus has definitely put a crimp in the US housing market and ruined all previous housing market forecasts. From the California housing market to the condo market in NYC, the current 3 month period is expected to be very subdued, but sales and prices may recover by January 2021.
There are more stats and reports below. NARs next report is due in a few weeks.
The consensus about this 3 month period is massive drops in home sales, home prices and rental prices. But will this happen? It’s taken some time for home sales to drop the last 2 months. Even with the shutdown of the economy in the last half of March, home sales still happened.
Realtors Making Sales Happen
Realtors are moving to new sales techniques and tools to help them list, show virtually, and complete transactions. Mortgage services too are no doubt moving to virtual fulfillment. Their efforts will play into all housing market sales forecasts.
The upcoming sales report for April from NAR will be interesting. The 3 month forecast (April, May, June) is looking strongly down, however the 6 month forecast sees sales recovering. Sales had been strong in January and February so it was a shock to everyone that a pandemic would take the whole market down.
Now that we’re into the deepest part of the Covid 19 pandemic, we’re wondering when the US housing market is going to rebound.
Zillow’s Housing Market Outlook
Zillow just released its 2020 housing market forecast. They’re expecting home sales to drop by 60% for the rest of the year, and home prices to decline on average just 2 to 3%. Clearly, the scarcity of listings, and reduced new home construction will ensure sellers get their price in the second half of 2020.
If the downturn only lasts 3 months, and there is financial assistance for homeowners, then they may feel they can ride this recession out and still get a similar price to last fall.
Zillow expects the market will zoom back in 2021 and prices will reach their Q4 levels by summer of 2021. Zillow offers leeway in their housing forecast though, by providing 3 different recovery scenarios. They cite the 2004 SARS outbreak in their optimistic version. SARS was contained well, however Covid 19 seems a bigger threat with still rising infection rates in some US states.
Their 3rd version of a slow recovery seems more plausible given the high rates of Covid infection, with worries about the US heartland right now. The fear is of several setbacks in cases and deaths before we have the disease under control.
How Far Away is a Covid 19 Vaccine?
Some Biotech companies are suggesting they’ll have a vaccine by fall, but normally vaccines take several years. A number of countries, and plenty of private research companies are pouring money into developing a vaccine. That should shorten the time to vaccine. Long term, it’s promising.
Even during March, Realtors were still reporting a lot of home sales and seemed confident of the market. However, one chart I viewed from Remax in Canada, showed an 80+% drop in April. Declines in sales would be different for each city (e.g., New York vs Denver).
Realtors are fairly resourceful today and will arrange to connect buyers and sellers and that would help bring the market back to life soon. To reach buyers and sellers, they’re using social media, e-signature apps for signing contracts and documents, virtual tours and e-closing apps with more frequency now.
NAR Flash Survey
Most Realtors reported that they believe the Covid 19 shutdown has only delayed sales by a few months.
NAR’s flash survey shows landlords and property managers were seeing rent payment defaults. It’s uncertain how this would affect the home sales market, other than perhaps to make more distressed and foreclosed homes available as home owners can’t make their mortgage payments.
64% of their respondents expected home prices to fall yet, only 24% of sellers are agreeing to drop them.
Black Knight Inc., reported a 3.3% increase in mortgage payment delinquencies over 30 days. Given 30 million new unemployed Americans, the April rate will likely climb considerably.
NAR Housing Market Report for March
In March, NAR reported home sales decreased by 8.5%. The median existing-home price for all types of homes during March was $280,600, up 8.0% from last year. Distressed sales rose by 1%.
They report that detached home sales fell to 4.74 million units in March from 5.16 million in February. The median existing single-family house price rose 8% YoY in March to $282,500.
Condo sales dropped 11.7% to 530,000 units in March. That’s only down 3.6% from a year ago. The median existing condo price rose 7.9% YoY to $263,400 in March.
Total housing inventory country wide rose 2.7% from February’s levels to 1.50 million units in March. That was down 10.2% from March 2019.
Shrinking Home Supply Effect
Total housing inventory at the end of December was 1.40 million units, down 14.6% from November, and down 8.5% from last December (1.53 million units).
Shrinking supplies and lower mortgage rates are elevating demand for new homes too.The US Department of Commerce said new home sales fell .4% to annualized rate of 694,000 units last month. 681,000 new homes were sold in 2019 which up 10.3% figures for 2018 (617,000). The median price for a new home was $331,400 in December. Builder optimism is at its higher level ever.
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Strong consumer confidence and lower rates (3.72% for 30 year fixed rate mortgage) are encouraging buyers to buy higher priced homes, which had sunk severely in the last year. First time homebuyers accounted for 31% of the sales, down from last month’s sales. Millennials are being cited as the top buyers from here on in.
Enjoy the following insight and data from Hud, NAR, US Census Bureau, NAHB, Trading Economics, Freddie Mac, Attom Data Solutions, Zillow, from today’s most credible housing information sources.
See the city housing market reports for San Jose, Los Angeles, San Francisco, Phoenix, Chicago, Denver, Oakland, Honolulu, Las Vegas and for California’s housing market. See below for mortgage rate forecasts and discover the full benefits of the best property management software.
Is This the Right Time to Buy a Home?
If you’re hoping to time the purchase of a home, are deciding on whether you should buy a second home or rental income property, feel uncertain about the economy, and mapping out your future, you’ll find these real estate market insights valuable. It may be the right time to buy in most cities, while in some, perhaps not.
In this well viewed chart from Zillow Research, you can see an upward trend in home prices. Zillow calls the market hot and expects average home prices across the country to reach $250,000 next year.
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Housing Price Changes Over Time
Nationally, there are some surprises in housing prices. In this chart, courtesy of Kiplinger research, prices in San Jose have jumped 130% since the recession bottom, while Denver, Seattle, San Francisco, Los Angeles, and Las Vegas home prices have doubled as well. Honolulu, New York, Boston, and Washington are a few cities that haven’t seen a full recovery. Property investors: please check out the best online property management software that smart individual investors are using.
|City||Median Home Price||% Change Since Peak|
% Change Since Bottom
|San Jose, Calif.||1,100,000||48.8||130.1|
|San Francisco, Calif.||860,000||22.4||127.4|
|Los Angeles, Calif.||634,000||6.1||91.6|
|San Diego, Calif.||545,000||4.4||84.1|
|New York, N.Y.-N.J.||410,000||-4||38.1|
|Washington, D.C.-No. Va.||375,000||-13.9||37.5|
|Riverside-San Bernardino, Calif.||339,000||-14.7||100.3|
|Colorado Springs, Colo.||280,000||34.7||60|
|Las Vegas, Nev.||266,000||-20.9||137.1|
|Salt Lake City, Utah||255,000||68.5||101.1|
Property Management: if you’re a Realtor, Landlord or Property Manager, please see our posts on multifamily, rental property markets, and on trends in Proptech, growing asset value, and adopting cloud software and automation, improve your property income strategy and investment ROI.
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Mortgage Rates Today
Today, The Bank of America was offering 30 year fixed rate mortgages at a rate of 3.375% for a suggested monthly payment of $884. Their 5/1 ARM variable rate is currently at 2.875%. With a further interest rate cut, more homes could become affordable for buyers.
Without inflation, it’s difficult for the FED to inflate the rates which would also jump up mortgage rates. The red is expected to cut rates in the fall and that’s music to the ears of everyone in property management and residential real estate.
The Big 4 Housing Market Factors
The economy, jobs rate and wages, low mortgage rates and rising housing availability are the 4 key factors which could revive the housing sector in 2020. Wages haven’t risen well, and if wages rise, we would likely be in for rapid price appreciation. With buyer and seller fear easing along with low mortgage rates, it’s a good time to buy a home. It may be a great time for multifamily apartment investors to grow their portfolios.
When the big 4 housing factors are present, it’s hard not to suggest stronger housing sales. As you’ll read here, sales and prices are predicted to rise into 2020.
In the buying vs renting question, the weight is in favor of buyers and rental investors, because mortgage and lending costs are so low. Yardi reports that the U.S. average rent price increased by 2.5% or $35 year over year. As of July 2019, the national median rent for a one-bedroom apartment is $1,220. Although rents have flattened (.5% for 1 bedrooms and .5% for 2 bedrooms), they may too see rises soon enough.
This summer with price rises ahead, more homes for sale, and low mortgage rates, this seems to be an onboarding period for the great American home buying train.
Existing Home Sales Keep Rising
HUD reports that purchases of new homes fell for a 2nd straight month while sales of existing homes rose to a 3 month high. In response to political uncertainties, new home construction was down, yet more homes are being put up for sale.
According to NAR, total existing-home sales (single-family homes, townhomes, condominiums and co-ops), rose 2.5% from April to a seasonally adjusted annual rate of 5.34 million in May. Census Bureau stated that number of new home sales fell to a five-month low of 626,000 in May.
Given how monthly volumes and prices fluctuate, next month’s results might reverse. Year over year home price increases were up 3% to 5% and not deterred by growing housing stock. Housing prices cooled the most in the West, including California.
With interest rates declining, and rumored to fall further this year, it’s no surprise to see big increases in mortgage refinancing, and a decline in the number of underwater borrowers. Inventory across the nation is becoming critically low again, and with low mortgage rates and fast rising sales, affordability will become the issue that will paint the headlines.
New Housing Needed
Lawrence Yun, NAR’s key rep says “more homes need to be built” yet despite continuing low lending rates, builders confidence does seem to be there. Building permits rose slightly in May to 269,000 units. Permits for the multi-family housing sector dropped 5% to 479,000 units.
According to Census.gov, here’s the most recent new building stats:
⦁ Building Permits: 1,294,000
⦁ Housing Starts: 1,269,000
⦁ Housing Completions: 1,213,000
Building permits rose in the South (6.8% to 693,000) and West (1.8% to 335,000) while they dropped in the Midwest (-8.4% to 174,000) and Northeast (-24.6% to 92,000).
Census.gov also reports that privately‐owned housing completions in May dropped 9.5% to an annual rate of 1,213,000. The April forecast was for 1,340,000 housing completions. Single‐family housing completions in May were at a rate of 890,000 which was 5% below the revised April rate of 937,000. The May rate for units in multifamily buildings with five units or more was 319,000.
Homeowner Equity Report
People buy homes and property to build equity and Americans are gaining big traction. A lot of young buyers are concerned and don’t want to lose out on the wealth building benefits of home ownership. Millennials in particular are ready to buy and are very frustrated at government action in the last 10 years. The memories of the last recession continue to fade however, and fewer mortgage holders are in trouble.
Homeowner equity in the US rose $264 billion in the first quarter of 2019. The gain over the last 4 quarters was $817 billion to reach $13.4 trillion. This means American wealth is growing fast creating plenty of funds for home upgrades, rental property upgrade, and a booming property management industry.
What are the Key Drivers of the Housing Industry:
They are low interest rates, high rent prices, strong employment and GDP, insufficient housing stock and the wrong kind of housing, demographic makeup, wages, population growth and migration, housing regulations, and builder and consumer optimism.
Should I Buy a Home This Year or Wait?
Buyers and renters are asking whether they should buy now or wait. Their decision is one thing, yet mortgage financing will have the biggest impact on whether renters can become buyers. Low mortgage rates and rising income will cause many to take the home buying leap, this summer.
Is it a Good Time to Buy a Home?
- low interest and mortgage rates
- American buyer wealth growing
- new housing construction dropping
- lots of new construction being released
- recent economic data is positive
- more housing stock available
- high rent prices
The chance of a housing crash is so minimal given low mortgage rates, tight supply, high employment, and excellent economy.
US Rental Housing Market 2019
Despite flat year over year growth of renta, some apartment rental markets are seeing stong price growth, particularly in the 2 bedroom segment. Due to affordability issues, higher rent prices may fuel multifamily building across the country. Take a look at the Denver housing market, Phoenix housing market, Hawaii housing market, San Jose housing market, San Francisco housing market and even the Oakland housing market for trends in multifamily building and apartment rental.
Millennials Driving the Market
Sales numbers from Freddie Mac and Fannie Mae, show most loan originations are from Millennials who are finding more starter homes to buy. With more Millennials hitting their family forming, home buying years, they’re outpacing even Generation X’s previous record home buying numbers. Millennials took out 45% of all mortgages last year.
Best Cities to Buy a Home?
The stats show mid-sized cities across the nation are growing in popularity, with improving economies and migration. These locations may give resistant sellers (Generation X and Babyboomers) a destination to move too. That’s an important factor for homeowners.
Check out the Phoenix housing market, Las Vegas Housing Market, Denver Housing Market, Chicago Housing market, Oakland housing market, New York housing market, and the Honolulu housing market for conditions in those cities.
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