Fall 2020 Home Market Forecast
Look for stability ahead despite shrinking inventory
In what’s been an uncertain year in most aspects of life, the housing market is no stranger to questioning what the future holds. With unemployment rates soaring and businesses struggling to stay afloat, what can we expect for the rest of the year from the real estate world?
While the housing market hasn’t been completely spared from the economic uncertainty plaguing other industries right now, it’s already began to rebound. With historically low mortgage rates incentivizing the idea of homeownership, the market has remained competitive, albeit with shifting buyer preferences and dwindling inventory.
As activity continues to increase, the market is experiencing the effects of the pent-up demand that’s been bubbling since the start of pandemic-induced lockdown measures.
“We are witnessing a true V-shaped sales recovery as homebuyers continue their strong return to the housing market,” says National Association of Realtors® (NAR’s) chief economist, Lawrence Yun.1 “Home sellers are seeing their homes go under contract in record time, with nine new contracts for every 10 new listings.”
With new home sales, pending home sales, housing starts, housing permits and purchase applications in V-shape recovery mode, experts were waiting for the final metric, existing home sales. When this number came in at the end of August at 5,860,0002—significantly higher than what was previously predicted—it served as the final piece of the puzzle in completing V-shaped recovery across the board.
“Homebuyers’ eagerness to secure housing has helped rejuvenate our nation’s economy despite incredibly difficult circumstances,” says NAR President Vince Malta.3
The domino effect of dwindling inventory
Enticingly low mortgage rates are driving competition and leading to a reduction in the number of homes on the market.4 And with a combination of Baby Boomers waiting to sell and Millennials wanting to buy, inventory is quickly tightening.
“Anecdotally, Realtors are telling me there is no shortage of clients or home seekers, but that scarce inventory remains a problem,” says Yun.1 “If 20 percent more homes were on the market, we would have 20 percent more sales, because demand is that high.”
This tightened inventory has the potential to cause home price growth, with the limits of per capita income and home prices currently being pushed.2 In mid-August, the NAR released data for 2020’s second quarter metro home prices that found median single-family home prices increased in 96 percent of measured markets in comparison to last year.3
Shifting buyer preferences: The quest for more space
After months of remote work with employees setting up shop in the middle of their dining room tables, potential buyers are looking for more space, adding home office to their list of must-haves. “The demand to work from home will remain strong, motivating buyers to look for a separate space for that home office,” explains realtor.com senior economist George Ratiu.5
Remote work is not only driving people’s desire for more space, it’s boosting secondary markets. With more companies allowing employees to continue to work from home, the need to live in high-priced metro markets is declining. “I see prices flattening in those markets while secondary smaller more affordable cities become more desirable,” says Ratiu—pointing specifically to Indianapolis, Fresno and Asheville, North Carolina.5
Experts are also forecasting some migration to the suburbs. “Luxury homes in the suburbs are attracting buyers after having lagged the broader market for the past couple of years,4” Yun explains. “Single-family homes are continuing to outperform condominium units, suggesting a preference shift for a large home, including an extra room for a home office.”
Maximize your buying power in a competitive market
If you’re one of the many buyers in pursuit of that enviable home office, or maybe more outdoor space, an extra bathroom or just a change of scenery, you’ll want to do whatever you can to stand out in today’s market.
It seems the lower the rates, the higher the competition, and rates continue to sit at record-lows. Freddie Mac reports the month of July brought the average U.S. mortgage rate to below three percent for the first time in decades worth of data, with the average rate for a 30-year fixed mortgage at 2.98 percent and the average 15-year rate at 2.48 percent.6
Before you step out into this low-rate, fast-paced market, make sure you have a pre-approval at your fingertips. If you come across something you love, you’ll want to be ready to make a move.