NAR predicts home sales to drop 10% in 2020

Painful decline in March and April will give way to “new normal”

TRD NATIONAL /
Apr.April 29, 2020 01:45 PM

With the housing market hobbled by Covid-19, pending home sales dropped nearly 21 percent in March, according to new data from the National Association of Realtors.

Overall, NAR is forecasting a 39.5 percent drop in home sales during the second quarter, an “off-the-chart negative” decline, chief economist Lawrence Yun said.

But the pain could be temporary, with the market returning to a new normal during the second half of 2020, Yun said. For the full year, NAR projected a 13.5 percent drop in home sales, compared to the 3 percent increase that was expected prior to the pandemic.

Citing pent-up demand, low inventory and low mortgage rates, NAR projected prices will rise 1 percent in 2020. “As the economy steadily re-opens and people feel more comfortable about social distancing activities, home buying should normalize,” Yun said.

NAR’s forecast is the latest prediction for the U.S. housing market. Freddie Mac has projected a 45 percent drop in the second quarter, compared to Fannie Mae’s 25 percent and the Mortgage Bankers Association’s 10.4 percent.

The average of the three is nearly 30 percent, according to a recent report from William Blair, which projected a 45 percent “spike” in refinance applications this year. “The recent rate reduction has created more than 14 million rate refinance eligible homeowners,” the report said.

Appearing on CNBC on Tuesday, Compass CEO Robert Reffkin said that search activity dropped 36 percent in March. “As the curve has flattened for new Covid cases, we’re seeing a proportionate flattening of the curve in activity in the real estate market,” he said.

But Reffkin said this week that both the number of new listings and new contracts are up 20 percent. He noted that buyers have shifted their focus to single-family homes (over condos) and properties with pools and outdoor space. He predicted second-home markets would rebound quickly as people rethink international travel.

Many experts believe that prices will be relatively flat for the rest of the year. NAR projected a 1 percent increase in 2020.

Skylar Olsen, senior principal economist at Zillow, said even if prices may go soft – particularly on the high-end – values will be “nothing like what we saw in the last housing crash.” Between 2008 and 2012, she said, home values dropped 30 percent. This time around, Zillow is predicting a 3 percent drop in home values, she said.

“Because of the sheer logistical challenge of everything right now, supply is shocked,” Olsen noted. “When you have a supply shock, that comes with upward pressure on prices. So the supply-and-demand shock are keeping prices more stable.”

Zillow data show home searches were down 19 percent in mid-March, but Olsen said the numbers are creeping up. As of April 15, searches were up 18 percent year-over-year. (New listings were down 38 percent on April 22, after dropping 44 percent on April 19.) “So many questions these days are, ‘Is now a good time to buy?’ They absolutely are considering it,” she said.

But instead of a V-shaped recovery, Olsen said an initial burst of activity will be followed by slower growth. “The imbalance is not coming from housing itself,” she said. “It’s anchored in job loss and economic uncertainty.”


Related Articles

arrow_forward_ios
Homeowners in redlined areas gained less equity over the past 40 years, exacerbating the wealth gap for blacks (iStock)

Homeowners gained far less equity in formerly redlined areas: study

Homeowners gained far less equity in formerly redlined areas: study
With home sellers also staying on the sidelines amid the public-health crisis, the market is now giving rise to bidding wars. (iStock)

The return of the bidding war

The return of the bidding war
220 Central Park South and a view of Queens (Credit: Jim.henderson and Dquai via Wikipedia)

TRD Insights: Every resi deal in NYC last week

TRD Insights: Every resi deal in NYC last week
New York City saw over $441 million in residential sales during the third week of April

TRD Insights: These were all the resi deals in NYC last week

TRD Insights: These were all the resi deals in NYC last week
Though social distancing measures are hampering deal activity, more than $600 million in property trades hit records last week, according to the latest TRD Insights analysis 

NYC saw $600M+ in sales transactions last week: TRD Insights

NYC saw $600M+ in sales transactions last week: TRD Insights
New listings are down in what is usually the busiest season for home buyers. (Credit: iStock)

Coronavirus dents home-buying season as new listings plummet

Coronavirus dents home-buying season as new listings plummet
In Brooklyn and Queens, the number of homes on the market have fallen (Credit: iStock)

Brooklyn, Queens home sales grew as inventory plummeted last quarter

Brooklyn, Queens home sales grew as inventory plummeted last quarter
(Credit: iStock)

Small Talk: Open Houses in the Age of Coronavirus

Small Talk: Open Houses in the Age of Coronavirus
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...