Going Forward: Housing Market Recovery and Economic Impacts
After the mandatory lockdowns that many areas of the world experienced through mid-March and April, the Housing Market is seeing shifts that project recovery. Many experts agree that there will continue to be an increase in economic activity that will positively impact Housing Market recovery.
Right Now: Global Economy
Upon first glance, the current numbers for the Housing Market and Economy do not look great. The IMF projects global growth at –4.9 percent in 2020, 1.9 percentage points below the April 2020 World Economic Outlook (WEO) forecast. The COVID-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and the recovery is projected to be more gradual than previously forecast. The recovery of the entire global economy is more uncertain than other specific industries such as the Housing Market.
Right Now: Housing Recovery
According Diana Olick of CNBC, “pending home sales spiked a stunning 44.3% in May compared with April, according to the National Association of Realtors.” That increase is the largest single-month jump ever in the history of the survey. The expectation of a 15% increase was shattered; however sales were still 5.1% lower than compared with May of last year.
Even though sales had fallen 22% for the month in April, since the economy shut down to slow the spread of COVID-19, buyers were still out during the month of May. Chief economist for the NAR said that this bounce back “also speaks to how the housing sector could lead the way for a broader economic recovery.”
Continued Recovery For the Housing Market
In order to keep these numbers climbing back up, several things need to be in place. Very notably, the amount of inventory on the market needs to increase. Many experts and local agents are struggling to find inventory to meet the demand, especially in the suburbs. Buyers are also looking for larger properties that offer home offices and nice kitchens. Additionally, construction needs to begin again at the pace with which it once was prior to lockdowns.
The supply of existing homes for sale at the end of May was nearly 19% lower annually, according to the NAR. Although, building permits, which projects future construction, did increase a bit. Additionally, newly built homes did well with signed contracts “jumping nearly 17% in May, compared with April, and were 13% higher than May 2019, according to the U.S. Census. Builders have been seeing strong demand from buyers looking to leave densely populated urban areas.” According to George Ratiu of Realtor.com, the data gathered by Realtor.com shows that there is a -19% YoY of new listings. Due to this, builders are benefiting and seeing increases in requests and contracts.
Additionally, low mortgage rates will hopefully help buyers as prices increase. According to NerdWallet, the average 30-year fixed rate as of today is 3.122%. These types of rates have been very typical the past few months. They have helped many refinance or choose to buy a slightly pricier home that was more easily managed by the low rate. Economists are hoping that the housing market recovery will continue on a positive trend.
With hotspots emerging throughout the Southeast and West, experts are wondering if the predicted and current trajectory of increased home sales will continue. Come this winter, the Realtor.com economics team is predicting another dip, siting the idea of a “W” shaped recovery. Per Forbes, “the company’s economics team, national home sales will improve in July, August, and September, largely driven by demand from millennial shoppers and transactions in secondary markets, before they decrease again due to a projected winter spike in coronavirus cases.”