We had a pretty unpredictable start to 2020, while there are still many unknowns’, homebuyers are crawling out of the wood works to find their forever homes. Home prices are increasing and reaching record highs, while mortgage rates are touching historic bottoms. What is our market going to look like for the remainder of the year? Let’s dive into what the experts are saying.
In the month of May new home sales jumped 16.6% versus the 1.9% that was originally expected. We also saw the average price jump from $312,000 to an astonishing $317,900.
Expectations for home sales were low, but virtual tours were at an all-time high! Many builders said that a majority of their buyers didn't even go inside prior to purchasing their homes. Many of the homes that are being sold have not even been built yet.
There is a shortage of homes within our market currently, this being one of the reasons why the demand is so high. We're also seeing an impact from COVID-19, many of these buyers want to get out into the suburbs and away from city life. These are single family homes these aren't the typical condo high-rises that you see in New York. The new buyers are interested in high-tech homes, so they can work and give their kids the proper schooling from home.
Forbes contributor Dima Williams asked professionals their opinions about what lies ahead. Here are some of their responses;
Is it going to be a V-shaped or a W-shaped housing market recovery? Why?
Mark Fleming, chief economist at First American Financial Corporation said, “It seems hard to deny that when one looks at many of the housing market statistics, a “V” shape is quite apparent. The main reason for the strong rebound is that factors existing before the coronavirus hit (lack of supply, low mortgage rates and a millennial demand for homeownership) have continued or even gained strength. Mortgage rates are even lower, supply is even tighter and millennials are still house hunting.”
Ralph McLaughlin, chief economist and senior vice president of analytics at Haus said, “It's going to be a W shape housing market recovery for three reasons. First, we think there will be an initial rebound simply due to pent-up demand for home buying that would have otherwise occurred in March, April, and May but will simply be pushed to June, July, and August. But after that, we're not expecting new demand to replace it at comparable levels, which will lead to another drop inactivity. Second, and I think we're seeing this already, is that the virus will make a comeback, which will lead to less demand for home buying in the fall. Third, there's a possibility that we'll see a broader impact on housing demand if the federal unemployment insurance bonus runs out at the end of the month.”
What housing indicators will trend up in the second half of 2020?
Mark Fleming noted, “One absolutely clear beneficiary of the supply and demand imbalance in the market today will be price appreciation. We expect it to remain strong, even accelerate in many markets this summer. You can’t buy what’s not for sale. And buyers will likely feel pressure to escalate their bids to win the “bidding war” on homes that are for sale.”
Taylor Marr, lead economist at real estate brokerage Redfin said, “Home builders have been supplying more of the inventory. As the virus continues to spread, new construction is especially attractive to tour and build.”
Although we had a difficult start to 2020, and we’re not sure what might come in the future, home sales are up for the time being. Builders and individuals in this industry are staying busy with home tours and sales.