Photo: James Bombales has revised its National Housing Forecast for 2020 amid far-reaching economic impacts caused by the COVID-19 pandemic. Analysts had expected a busy spring market with fierce competition among buyers competing for limited inventory. Instead, what they got were plummeting home sales and an even smaller pool of available properties.

“COVID-19 has really dramatically changed the way the housing market is going to perform this year,” said Chief Economist Danielle Hale. “We started off with the potential for the best year in more than a decade for sales. But we’re going to see ups and downs as the market grapples with an unsteady economy. This will affect buyers and sellers across the board.”

With many homeowners choosing to hunker down rather than sell, home prices have been largely shielded from fluctuations. now expects a marginal increase of 1.1 percent to the median sales price for existing homes with the possibility of a small decline by the end of the year.

While sales are expected to plunge 15 percent over 2019 levels, the forecast calls for a rebound in late summer and fall, particularly by homeowning-hungry Millennials. Demand will likely ebb and flow as we see a second wave of infections hit markets across the country.

There will be fewer listings to browse, but homebuyers requiring a mortgage will benefit from decreased competition as investors and cash buyers peter out. Another perk for first-time buyers will be the increased availability of lower-priced homes.

Although mortgage rates are expected to remain low — potentially falling to under 3 percent by year-end — lenders are tightening their purse strings and requiring higher credit scores and down payment sums from borrowers. Savvy buyers will want to shop around for the best rates and mortgage products.

Would-be sellers are suffering from a lack of confidence in the job market and are deterred by their own chances of snagging a suitable home as buyers. “Sellers don’t like to reduce their prices. So they decide not to sell,” said Hale. That being said, more buyers are likely to return to the market in late-summer as social distancing restrictions ease.

The pandemic has caused housing preferences to shift and there will be renewed interest in suburban and rural markets as Americans flee large, expensive cities. More companies are adopting work-from-home policies and employees may no longer need to live within commuting distance of their offices.

“The experience of being at home for a long period of time has everyone rethinking their priorities,” said Hale. “People are recognizing space is more important, so they’re looking for more affordable areas where they can have more space at the same price.”

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