At the end of last year, economists expected 2020 to be a solid year for housing. But now, thanks to the coronavirus pandemic, home sales are about to plunge in the months to come.
A new report from Fannie Mae
forecasts that home sales will drop by almost 15% in 2020. This decline will translate into a slowdown in sales of existing homes, which, according to Fannie Mae, will fall at an annual rate of 4.54 million units, compared to 5 , 34 million in 2019.
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Meanwhile, home sellers are withdrawing their homes from the market. “On the supply side, the number of registrations is decreasing, because those who have houses to offer can either hesitate to allow foreigners to visit their house, or fear that the lack of demand puts downward pressure on the selling price they might otherwise receive, “Fannie Mae chief economist Doug Duncan said in the report.
While the housing industry was in good shape at the start of the year, the only thing many economists agreed to curb sales growth was the supply of housing. In the years following the Great Recession, the construction of houses did not keep pace with the creation of households, which left a significant vacuum in the market.
As a result, economists expected that the low number of homes on the market would prevent buyers from finding a property to buy that they could afford. Potential home sellers pulling their ads can exacerbate this problem – although market buyers may be more fortunate due to the lower demand fueled by the burgeoning labor market.
What will happen to housing prices?
Sellers don’t necessarily have to worry about falling prices if they put their homes on the market, according to Fannie Mae. Fannie Mae still predicts that the median price of an existing house will be $ 275,000 in 2020, compared to $ 272,000 last year, while the median price of a new house is expected to drop from $ 321,000 to 326 $ 000.
While lower sales are expected to slow the pace of mortgages for loans used to buy homes, refinancing is expected to remain strong throughout the year due to the low interest rate environment. Fannie Mae predicts that $ 1.41 trillion in refinancing loans will come from 2020, up from $ 1.01 trillion last year.
According to Fannie Mae, the good news for potential home buyers and sellers is that the housing market is expected to improve next year. The mortgage giant is currently expecting both the US economy and home sales to rebound in 2021. But that rebound depends on the path of the pandemic.
“The historically rapid decline in economic activity, the accompanying loss of jobs and our limited, albeit improving, understanding of COVID-19 make it a particularly difficult forecasting environment,” said Duncan. “The variability around this forecast is wide and depends on the incidence, severity and duration of the virus, as well as the response of the public and decision makers to the new information.”
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