US Housing Market Forecast 2020 – 2021: No Crash Coming!

Here are the updated housing market trends & predictions for 2020 & 2021. As of now, the housing market remains a hot seller’s real estate market, with annual price growth reaching record highs and inventory continuing to fall. But Realtor’s latest recovery trends point towards more balanced conditions. The demand has softened up as compared to previous weeks and the supply saw the largest improvement since March.
Whether it will cool off with a sharp decrease in the pace of price growth can only be seen in 2021. As of now record-low mortgage rates and shortage of inventory has kept the US housing market strong with respect to buyer demand. Strong housing demand pushed by the pandemic is driving prices insane in 2020. Both prices and sales are surging month-over-month breaking new records.
In the article, you’ll find how the US housing market is recovering week after week from the blows of the pandemic. New home sales have also risen during the pandemic and existing home sales are at a 1-year high. The real estate sector has also been highly supportive of the economic recovery of the country so far. As prices keep climbing month-over-month, it just shows the resilience of the US housing market in 2020 in the face of an ongoing economic recession.
Let’s first look at the negative housing forecast for 2021 and its reasoning. The current short-term demand that is reflected in sharply rising prices, can be attributed to the pent-up demand for home purchases from the March-July period when a great part of the country was in total lockdown. The housing sales and prices have stayed strong through the summer months amid increasingly short inventory and high demand.
This strong buyer activity points to a fall & winter housing market that is more active than normal, where buyers may face more competition and may have to act more quickly than usual to snag their dream home. In the winter season, the sales and prices will continue to rise but at a slower pace. The housing demand is still strong but it has shown some early signs of softening up.

At the same time, it is important to note that more than 6 million households failed to make their rent or mortgage payments in September, according to the Mortgage Bankers Association’s Research Institute for Housing America. In the third quarter, the percent of homeowners and renters behind on their payments fell slightly from the prior quarter. Still, the overall amount remains high.
With inventory falling to record lows, mortgage lending standards tightening and unemployment rising, new and existing home sales are precited to fall back over the remainder of 2020. That will help take some of the heat out of the housing market and soften the price growth. The major effect will be seen in the summer of 2021 because foreclosure that starts today is probably not going to be processed until mid of 2021.
At the moment, the moratoriums on foreclosure have kept lenders from being able to even start their processing of defaults. One of the negative housing predictions is that the supply in the form of foreclosed homes is may overwhelm the demand by many folds in 2021. The result would be that prices are going to plummet again and the real estate sector will likely cool off in 2021.
According to Capital Economics, the US rental markets have been getting looser, and we can expect vacancy rates to rise further to 5.5% by the end of 2020. That will push rental growth down to -1.5% year-over-year over the next couple of quarters. But, beyond that, the lack of homes for sale means rental demand should recover alongside the economy, and yields will ease back over 2021 and 2022.
However, we won’t speculate much about it and would rather focus on the current housing indicators and their recovery from the lows caused by the pandemic.
As was expected, home buying and selling prospects drastically improved in October 2020 from pandemic lows. With unusually high buyer interest this late in the homebuying season, buyers are moving much faster than this time last year to beat out competition and lock in low mortgage rates.
Homes are being sold at an increasingly fast pace when compared to the previous year. Housing prices have surged to new records due to very strong demand but low mortgage rates are helping buyers offset this increased cost. Mortgage rates for housing are anticipated to stay at near 3% over the next 18 months which will make homes more affordable.
Housing inventory continues to be constrained by stronger than normal buyer demand and little new inventory coming on to the market. These new properties are quickly taken out of the market from heavy buyer competition. Therefore, housing units are still in short supply with unsold inventory sitting at a 2.7-month supply at the current sales pace.
But the improved selling prospects in September & October (in terms of new listings) are a good sign and will need to remain on that path to bring more homes into the market. With supply-constrained and demand boosted, house prices seem to rest on solid foundations in the pandemic.
According to Zillow’s, seasonally adjusted home values would increase by 2.9% between September and the end of 2020, and rise 7% in the 12 months ending September 2021. This forecast is notably more optimistic than previously. The previous forecast predicted a 4.8% increase in home prices between August 2020 to August 2021.
Home prices are holding up to the decline in transaction activity. Price gains are reaccelerating as the mix of homes for sale appears to be reverting toward pricier properties. With the supply of available homes continuing to balance, and the entry-level demand is expected to remain strong. According to Yun, NAR’s chief economist, home prices will likely appreciate 4% in 2020, before moderating to 3% in 2021 as more new supply reaches the market.
US SINGLE-FAMILY HOUSING MARKET TRENDS
Builder sentiment is at an all-time high and building permits have rebounded from pandemic lows. In a sign that housing continues to lead the economy forward, builder confidence (NAHB/Wells Fargo HMI index) in the market for newly-built single-family homes continues to increase.
The latest reading of 85 is up 2 from last September’s 83 and at its highest level in the indicator’s history, exceeding its December 1998 record. Record ow mortgage rates have boosted demand for new homes. A reading over 50 indicates that more builders view sales conditions as good compared with those who view them as poor.
“The housing market continues to be a bright spot for the economy, supported by increased buyer interest in the suburbs, exurbs and small towns,” said NAHB Chief Economist Robert Dietz.
All the HMI indices posted or matched their highest readings ever in October. The HMI index gauging current sales conditions rose two points to 90, the component measuring sales expectations in the next six months increased three points to 88, and the measure charting traffic of prospective buyers held steady at 74.
Looking at the three-month moving averages for regional HMI scores, the Northeast increased six points to 82, the Midwest increased three points to 75, the South rose three points to 82 and the West increased five points to 90.
September was a record month for all HMI indices, including current sales conditions, sales expectations, and traffic of prospective buyers. NAHB noted that a shift toward suburban areas working in tandem with incredibly low-interest rates has kept builders busy.
However, that may translate to higher costs and delays in receiving building materials, due to high demand, low supply, and 20 percent tariffs on Canadian supply. “Lumber prices are now up more than 170 percent since mid-April, adding more than $16,000 to the price of a typical new single-family home,” NAHB Chief Economist Robert Dietz said in a statement.
The NAHB/Wells Fargo Housing Market Index (HMI) index is designed to measure sentiment for the U.S. single-family housing market and is a widely watched gauge of the outlook for the U.S. housing sector. The NAHB gets input from builders on how confident they are in the housing market based on buyer behavior, sales, and incorporates any forecasts as well.
NEW RESIDENTIAL HOME SALES
According to Urban Land Institute, real estate market conditions and values in the U.S. are expected to rebound in 2021 and trend even higher in 2022, with single-family homes outperforming other sectors such as commercial, retail, hotel, and rental.
New single-family construction starts will fall slightly to 871,250 in 2020 before rising to 940,000 in 2021 and 975,000 in 2022, the highest level since 2006. In the meantime, home prices will grow an average of 4.1% over the next three years, above the long-term average of 3.9%, according to the report, based on a survey of 43 economists at 37 leading real estate organizations.
Sales of new single-family houses in September 2020 were at a seasonally adjusted annual rate of 959,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 3.5 percent (±19.9 percent) below the revised August rate of 994,000 but is 32.1 percent (±28.8 percent) above the September 2019 estimate of 726,000.
The median sales price of new houses sold in September 2020 was $326,800. The average sales price was $405,400. The seasonally-adjusted estimate of new houses for sale at the end of September was 284,000. This represents a supply of 3.6 months at the current sales rate.
Courtesy of Census.gov
As far as home sales are concerned there could again be a dip in sales due to the rise in infections in the fall season. Till the time coronavirus pandemic exists it will lead to a see-saw recovery with ups and downs. Let us discuss in detail the various housing indices & their predictions for 2020 & 2021. We have updated this article with the latest housing market report from various credible sources like Realtor.com (check reference section).
The latest weekly housing data released on October 24, 2020, by Realtor.com, shows that median listing prices grew at 12.2 percent over last year, marking 11 consecutive weeks of double-digit growth in asking prices. The price of the typical home for sale remains unchanged at $350,000.
New properties listed for sale were down 2 percent. The new listings trend continues its momentum in the right direction. This time of the year normally sees a rapid decline in the number of newly listed properties but seller confidence is improving and they are bringing in a higher than a usual number of listings into the market. This will provide some slight relief for buyers facing few options to choose from.
The total active listings were down 38 percent. This week saw a hint of good news in that the pace decline of active listing remained steady. It’s been six consecutive weeks of steady or improving decline.
With high interest from buyers and a limited flow of new listings, the total active listings have been lagging behind from the previous year. The current trend sets up a movement toward more balanced market conditions and gives buyers some hope because it would slow down the price growth.
Time on the market is 14 days faster than last year – a full 2 weeks faster than a year ago. The rapid turnover reflects the faster than usual pace of home sales despite the usually slower season. In addition to the sellers’ market pressures, in which homes sell quickly after listing, measured time on market is also dropping as the share of fresh listings rises.
The relatively good news for buyers is the time on market trend does not appear to be getting worse in the last 5 weeks. This means that if homes sit on the market for some more time, sellers may still have an advantage in many markets, but that leverage may be starting to ease.

Weekly Housing Trends
First Two Weeks March
Week Ending Oct 10
Week Ending Oct 17
Week Ending Oct 24

Median Listing Prices
+4.5% YOY
+12.2% YOY
+11.1% YOY
+12.2% YOY

New Listings 
+5% YOY
-5% YOY
-6% YOY
-2% YOY

Total Listings 
-16% YOY
-38% YOY
-38% YOY
-38% YOY

Time on Market
4 days faster YOY
14 days faster YOY
13 days faster YOY
14 days faster YOY

Housing Market: Will it Crash or Recover?
The US housing market is far from crashing in 2020 or 2021. In fact, it continues to play an important supportive role in the country’s economic recovery. Let’s first see how consumer surveys are responding in wake of this crisis.
The Federal Reserve Bank of New York’s Center for Microeconomic Data released the September 2020 Survey of Consumer Expectations, which shows improvement in the labor market and spending expectations, as well as less pessimistic views about their own financial situations in the year ahead.
Housing price growth expectations returned to their pre-COVID-19 levels, and debt delinquency expectations remained low. In contrast, year-ahead household income expectations remain weak compared with the pre-COVID-19 period. The median inflation expectation remained unchanged at 3.0 percent at the short-term horizon, while it declined 0.3 percentage point to 2.7 percent at the medium-term horizon.

Median inflation expectations in September remained unchanged at 3.0% at the one-year horizon and decreased 0.3 percentage point returning to its July level of 2.7% at the three-year horizon.
Median household spending growth expectations increased from 3.0% in August to 3.4% in September, its highest reading since May 2019.
Mean unemployment expectations—or the mean probability that the U.S. unemployment rate will be higher one year from now—decreased from 39.1% in August to 36.4% in September, below its 2019 average of 36.9%. The decline was driven by respondents below the age of 60.

The pace of existing-home sales has jumped to a level not seen since 2006 and, importantly, was followed by strong pending sales, purchase mortgage applications, and construction data. As Federal Reserve has made clear that it has no intention of raising interest rates in the near future, many households are seizing the opportunity to refinance their existing mortgages.
Historically, low-interest rates are also an inducement to buy homes, but slow supply growth continues to result in high levels of home price appreciation, which is offsetting some of the affordability benefits of the lower rate environment, according to the Fannie Mae Economic and Strategic Research (ESR) Group.
The Fannie Mae Home Purchase Sentiment Index® (HPSI) increased 3.5 points in September to 81.0, rising for the second consecutive month and continuing the rebound from late spring. Year over year, the HPSI is still down 10.5 points but it has recovered more than half of the early pandemic-period decline, mirroring the strong home purchase activity of the past few months.
The index which measures housing attitudes, intentions, and perceptions, using six questions from the National Housing Survey® (NHS), is a good indicator of the recovery and buyer and seller behavior.
Three of the six HPSI components increased month over month, with consumers reporting a substantially more optimistic view of home-selling conditions, expected home price growth, and the labor market, but a more pessimistic view of homebuying conditions and mortgage rate expectations.
The latest survey that those who think it’s a ‘good time to sell’ (56%) have outnumbered those who think it’s a ‘good time to buy’ (54%). Mortgage rates and slow but steady improvements to the job landscape continue to propel confidence for first-time buyers.
Zillow’s market pulse report dated October 28, 2020, also shows regaining of buyer confidence with a modest weekly improvement in mortgage applications. Applications for home purchase loans improved slightly on the week, halting a streak of four straight weekly declines.
Despite the four weekly declines, application activity pertaining to home purchase mortgage loans remains near its highest level in the last 12 years and 24% above last year’s levels. In the week ending October 17, there were 37% fewer homes on the market than there were in the same week last year, according to Zillow Economic Research, and the average purchase loan size that was applied for last week was $372,600 – a new all-time high.
Mortgage delinquencies have declined, but improvement is slowing 6.88% of outstanding mortgages were at least 30 days behind on payments in August, down a scant 0.03 percentage points from July, according to Black Knight. If the current rate of progress continues, more than a million loans will be behind on payments when forbearance programs begin to expire in March 2021.
U.S. rental payment rates appear to be staying afloat. The National Multifamily Housing Council found 94.6 percent of apartment households made a full or partial rent payment by October 27 in its survey of 11.4 million units of professionally managed apartment units across the country.
This is a 1.2 percentage point, or 141,583 household decrease from the share who paid rent through October 27, 2019, and compares to 92.2 percent that had paid by September 27, 2020. These data encompass a wide variety of market-rate rental properties across the United States, which can vary by size, type, and average rental price.
Realtor’s Housing Market Recovery Index
According to Realtor.com’s latest recovery report, the Housing Market Recovery Index reached a new high of 112.4 nationwide for the week ending October 24. It is now 12.4 points above the pre-COVID baseline and 1.5 points above last week. (Click on the image below to find out how to read the recovery index).

Houisng Market Recovery: Week ending 10/24
CurrentIndex
w/w change
# of consecutive weeks above recovery

Overall Housing Recovery Index
112.4
+1.5
15

Housing Demand Growth Index
123.6
-4.0
25

Listing Price Growth Index
108.6
+1.1
21

New Supply Growth Index
106.1
+3.8
5

The pace of Sales Index
118.9
+1.2
14

This week’s demand-supply imbalance improved a bit, as the housing demand index saw the first significant drop since June by declining to123.6, while the housing supply index jumped to 106.1, which was the largest improvement since March. It shows that that seller confidence continues to improve.
The recovery index had reached 106.6 nationwide for the week ending July 18, bringing the index above the pre-COVID recovery benchmark for the first time since March. As a result, this is an indicator that things are heading towards a balanced real estate market. The pace of demand eased and the pace of new listings improved suggesting the normal seasonal slowdown in buying activity may finally be taking place in winters.
This week, all components of recovery except demand saw an improvement over last week, positioning them above recovery pace. Months of double-digit price growth and record level inventory may finally be translating into buyer fatigue. While promising, the market will need to see conditions hold and improve through the end of the year to fully make up for the lost ground in the spring.
Regionally, the West (122.3) continues to lead the pack in the recovery, with its index increasing 3 points above last week. The Northeast (111.2), Midwest (109.1), and South (106.3) also remain above recovery pace.

Region
Avg Recovery Index(week ending 10/24)
Weekly
Change

West
122.3
+3.0

South
106.3
+1.2

Northeast
111.2
+0.4

Midwest
109.1
+1.3

Locally, a total of 47 markets have crossed the recovery benchmark as of this week, one less than the previous week, with only Buffalo, NY; Oklahoma City, OK; and Chicago, IL; below the recovery point. The overall recovery index is showing the greatest recovery in Las Vegas, Los Angeles, Seattle, New York, and San Francisco.
The markets which struggled to recover through the summer but appear to be recovering now are Florida, Georgia, Louisiana, Alabama, and parts of the Midwest (Michigan, Indiana, Wisconsin). The graph below charts the index by showing how the real estate market started out strong in early 2020, and then dropped dramatically at the beginning of March when the pandemic paused the economy. It also shows the strength of the recovery since the beginning of May. A V-shaped recovery can be seen.
Credits: Realtor.com (Housing Market Recovery Index)
All of this shows that with the opening of up U.S economy, the key housing indicators have begun to turn around. Yearly declines in newly listed inventory have slowed and listing prices have recovered after reaching their low point during mid-April. The overall move above recovery was much needed and it will need to hold for at least another 10 weeks to make up for the lost activity in the second quarter of the year. However, a sustained seller comeback is uncertain — the fear of the rise in coronavirus cases in the fall season is still looming large. The health & economic crisis poses a real upward hill for housing participants going into the fall.
Is The Housing Demand Increasing or Decreasing?
According to the demand index tracked by Realtor.com, it stayed well above recovery but this week’s index fell to 123.6, a decrease of 4.0 points over the prior week. It is currently 23.6 points above the January baseline. This demand index is calculated by tracking growth in online search activity. Homebuyer interest continues to outpace last year’s levels over the last few months.
The pandemic led to record-high prices, short supply, and economic uncertainty but despite all of that the buyer demand has not been affected significantly since May. The buyer demand continues to run ahead of supply, sustaining annual house price growth of 10.1 percent. Although this week the housing demand softened a bit, the coming weeks should paint a clearer picture of whether demand is softening or will remain strong through the winter.
Regionally, all the 50 large markets are now positioned above the recovery trend. The most recovered markets for home-buying interest include Sacramento, Washington, New York, Austin, and Philadelphia, with a housing demand growth index between 138 and 146.
Are Housing Prices Increasing or Decreasing?
The ‘home price’ component of the recovery index – which tracks growth in asking prices – is now at 108.6, an increase of 1.1 points last week. This is 8.6 points above the January baseline. Housing prices are increasing due to tight supply and higher demand. Due to the extremely tight inventory, the sellers have regained leverage with the fastest listing price growth recorded in more than two years.
Although the fastest price growth has been recorded since January 2018 it is yet to be seen whether higher asking prices will translate into higher selling prices. A seller would always prefer sales to a list price ratio of 100% or more. As inventory and foot traffic grow through the end of the summer, we’ll get a clear indication of this ratio.
Regionally, 29 of the 50 largest markets are seeing growth in asking prices surpass the January baseline, three more than the previous week. In the top 10 most-recovered markets, asking prices are now growing at 15 percent year-over-year, on average.
The most recovered markets for home prices include Austin, New Orleans, Pittsburgh, Riverside-San Bernardino, and New York, with a home price growth index between 110 and 115.

Are Housing Sales Increasing or Decreasing?
Home sales are recovering from the setback of the coronavirus led crisis with fall becoming the peak homebuying season. The housing sales are predicted to recover at a faster rate in this quarter. The ‘pace of sales’ component saw continued signs of improvement in this week as well and continues to remain above the pre-COVID baseline.
The time-on-market index reached 118.9, up 1.2 points from last week, and 18.9 points above the January baseline. This component tracks the differences in time-on-market and an increase of 1.2 points suggests that buyers and sellers are connecting at a faster rate.
Regionally, 47 of the 50 largest markets are now seeing the time on market index surpass the January baseline, one more than the previous week. In the top 10 most recovered markets for the pace of sales, time-on-market is now down 24 percent, on average, year-over-year.
For this week, the most recovered markets for time-on-market include Los Angeles, San Diego, Louisville, Las Vegas, and Boston, with a pace of sales growth index between 133 and 161. Seller’s real estate markets in the pre-COVID period are better positioned for a recovery in the months ahead.

Is Housing Supply Increasing or Decreasing?
In the week ending October 24, the housing supply component, which tracks the growth of new listings, has increased to 106.1. It is up 3.8 points over the prior week and 6.1 points above the January baseline. It had crossed the January baseline for the first time since early August. In the first week of August, the index had managed to reach the January baseline as more sellers re-entered the market but it was a temporary boost in new listings which weakened later in August.
Further improvement in the housing supply could be limited going into the fall as the peak cycle subsides. The next few weeks in November will be key in how the market could resist the usual seasonal decline in new listings throughout the fall.
Regionally, 28 of the 50 largest markets saw the new listings index surpass the January baseline, one more than last week. The most recovered markets for new listings included Las Vegas, San Jose, San Francisco, Seattle, and New York, with a new listings growth index between 147 and 176. Trends show that sellers were returning faster in the more expensive housing markets. 
More homes being listed for sale in areas with wealthier demographics goes some way to explain the strength of the housing market at a time of recession and rising unemployment.

Are Housing Rents Increasing or Decreasing?
The median U.S. rent stood at $1,771 in August, down 0.3% from July, the largest monthly decrease since September 2017, according to the real estate website Zillow. Their data shows that year-over-year increases in rent have slowed every month in the U.S. since the pandemic began, dropping from growth of 3.8% in February to just 0.7% in August.
Rental concessions on Zillow listings are now nearly twice as common as they were in February, as landlords strive to attract new tenants in a rental market that has softened considerably since the coronavirus pandemic took hold.
According to Zumper’s National Rent Report (November 2020), overall, the national 1-bedroom median rent decreased 0.5% last month to $1225, while the 2-bedroom median decreased 0.4% to $1483. In year-to-date terms, the 1-bedroom median was flat and the 2-bedroom median increased 0.3%.
The gap in median prices between historically expensive rental markets and cheaper ones continued to decrease last month but slowed slightly. The standard deviation of median 1-bedroom prices in the top 100 cities has decreased by 19% from a year ago
Rents are falling across most major cities, such as San Francisco, CA (-20.7%); Oakland, CA (-19.2%); New York City, NY (-15.0%); Seattle, WA (-14.9%); Washington DC (-14.8%); San Jose, CA (-13.5%); Los Angeles, CA (-13.0%); Boston, MA (-12.6%); Denver, CO (-12.5%); Irving, TX (-10.7%); Wichita, KS (-10.4%); Corpus Christi, TX (-8.9%); and Plano, TX (-8.4%)., forcing landlords to offer incentives to attract tenants after an exodus from urban areas.
These big cities are losing demand because people are having a hard time finding jobs during the pandemic and are forced to move back in with their families. However, there is some indication the decreases have slowed down as compared to the previous month.
Top 5 Rental Markets in the US

San Francisco, CA: 1-bedroom median price dropped 1.1% from the month prior to $2800. The 2-bedroom median dropped 2.9% to $3690. Both the 1-bedroom and 2-bedroom medians were down about 21% from last year.
New York, NY: 1-bedroom median price dropped 1.9% from the month prior to $2550, and the 2-bedroom median decreased 3.0% to $2900. The 1-bedroom median and 2-bedroom median were down 15.0% and 17.1% from last year, respectively.
Boston, MA: 1-bedroom median price was down 3.9% from the month prior to $2210. The 2-bedroom median rent dropped 4.3% to $2680. The 1 and 2-bedroom medians dropped 12.6% and 8.5% from last year, respectively.
San Jose, CA: 1-bedroom median decreased 4.9% to $2120 from the month prior and the 2-bedroom median decreased 3.2% to $2680. 1 and 2-bedroom medians decreased by 13.5% and 9.2% from last year, respectively.
Oakland, CA was the 5th priciest rental market with the 1-bedroom median decreasing 5.2% from the prior month to $2020, and the 2-bedroom median decreased 2.6% from the prior month to $2630. Oakland 1 and 2-bedroom medians decreased by 19.2% and 12.3%, respectively.

Credits: Zumper National Rent Report
Housing Market 2020: Monthly Report
The housing market before the pandemic was remarkably strong. The coronavirus crisis response was unprecedented. The federal government ordered a de facto shutdown of the entire private economy, closing an estimated eighty percent of businesses. It has caused unemployment to soar to at least ten percent, while tens of millions are idled. According to the National Association of Realtors®, overall sales decreased year-over-year, down 17.2% (4.33 million units in April 2020) from a year ago (5.23 million in April 2019).
The national median existing single-family home price in the first quarter of 2020 was $274,600, up 7.7% from the first quarter of 2019. The national median existing single-family home price in the first quarter of 2020 was $274,600, up 7.7% from the first quarter of 2019 ($254,900). Housing market data of the last month showed that it is beginning to heat up again as more sellers and buyers enter the market.
Realtor.com’s latest national housing report shows that it is an unusually active fall market where homes sold more quickly in September than August. Improving but continued lack of newly listed homes on the market is driving inventory to all-time lows and is also steadily pushing prices up higher into double-digit growth territory for the first time since 2017.
Homes continue to be quickly sold as pent-up buyer demand eats away at a small inventory of homes for sale, and sellers are still slow to bring new homes onto the market.

National inventory declined by 39.0% year-over-year, and inventory in the largest metros decreased by 39.6%.
The inventory of newly listed properties declined by 13.8% nationally over the past year.
The national median listing price in September was $350,000, up 11.1% year-over-year.
Housing prices rose by an average of 9.3% in the largest metros.
Nationally, the typical home spent 54 days on the market in September, 12 days less than the same time last year, and three days less than last month.
In metros, the typical home spent 44 days on the market, and homes spent 10 days less on the market, on average, compared to last September.

Housing Market Supply Trends
Nationally, inventory decreased 39.0% year-over-year, a faster rate of decline compared to the 36.4% y-o-y drop in August. This amounted to a loss of 529,000 listings (homes for sale) compared to September of 2019. The volume of newly listed properties in September decreased by 13.8% percent since last year. As compared to the previous month, it was a decrease of 11.8%.
While still well below last year’s levels, the rate of decline in newly listed properties for sale has improved a lot from a peak decline of 44.1 percent year-over-year in April, and a decline of 13.4 percent year-over-year last month. However, it is going to continue to be difficult for buyers to find their perfect home this fall season, while sellers who face little competition amongst each other may find selling their home easier this fall season than is typical.
Regionally, the Western US housing market has seen the greatest improvement in newly listed properties, now down only 2.4 percent year-over-year, compared to down 7.3% in the northeastern metros, 15.1% in midwestern metros, and 16.1% in southern metros. Overall, the housing inventory in the 50 largest U.S. metros declined by 39.6% percent year-over-year in September. This is a faster rate of decline compared to the 38.1% decline in August.
In September, none of the largest 50 metros saw an inventory increase on a year-over-year basis and 35 out of 50 saw greater inventory declines than last month. Newly listed homes decreased by 11.4% over the year in the 50 largest metros, and approximately half (24 of 50) of large metros saw the inventory of newly listed homes worsen since last month.
The metros which saw the steepest declines in inventory include Indianapolis-Carmel-Anderson, IN (-58.5%); Riverside-San Bernardino-Ontario, CA (55.6%); and Providence-Warwick, RI-MA (-53.2%). 
According to Zillow’s Weekly housing data through Oct 24, the downward slide of inventory that began in late May continued, dropping 1.3% week over week and reaching 37.2% lower than at this time last year. The last time inventory grew year-over-year was at the end of July 2019. New listings are down 3.7% from last year and 7.1% from the week prior.
In late August, a brief surge of new listings almost brought numbers up to 2019 levels, but that pace dropped off again in September & October, contributing to the ever-deepening drought of overall active listings.
According to the National Association of Realtors, the total number of homes available for sale continued to be constrained in September as well (Data for October is not released yet). Unsold inventory sits at a 2.7-month supply at the current sales pace, down from 3.0 months in August and down from the 4.0-month figure recorded in September 2019.
Properties typically remained on the market for 21 days in September – an all-time low – seasonally down from 22 days in August and down from 32 days in September 2019. Seventy-one percent of homes sold in September 2020 was on the market for less than a month.

Total housing inventory at the end of September totaled 1.47 million units, down 1.3% from August and down 19.2% from one year ago (1.82 million). 

Total housing inventory at the end of August totaled 1.49 million units, down 0.7% from July and down 18.6% from one year ago (1.83 million). 

Total housing inventory at the end of July totaled 1.50 million units, down from both 2.6% in June and 21.1% from one year ago (1.90 million).

Total housing inventory at the end of June totaled 1.57 million units, up 1.3% from May, but still down 18.2% from one year ago (1.92 million).

Total housing inventory at the end of May totaled 1.55 million units, up 6.2% from April, and down 18.8% from one year ago (1.91 million).

Total housing inventory at the end of April totaled 1.47 million units, down 1.3% from March, and down 19.7% from one year ago (1.83 million).

Unsold inventory was at 3.4-months in March 2020, when this pandemic hit the nation. At present, it is a 3-month supply.

Housing Price Trends
In September, the median national home listing price on Realtor.com grew by 11.1 percent year-over-year, to $350,000. This is an acceleration from the 10.1% growth seen in August. The nation’s median listing price per square foot also grew by 13.9% year-over-year, an acceleration from the 11.9% growth seen last month.
In April & May, the nation’s median listing price growth had deaccelerated, driven by diminished seller expectations and a shift in the mix of homes for sale. In June, the median national home listing price growth accelerated. It grew by 5.1 percent year-over-year, to a new high of $342,000. It was an acceleration from the 1.6 percent year-over-year growth seen in May, 0.6 percent year-over-year growth seen in April, and 3.8 percent year-over-year growth seen in March.

National Housing Price Trends From March 2020 till September 2020

In the first two weeks of March, the median listing prices were increasing 4.4 percent year-over-year on average.

The median list price on pending contracts in the four weeks through April 26 was up 2.6% from one year ago.

The April national median listing price was $320,000, up 0.6 percent year-over-year.

This was a further deceleration from the 3.8 percent year-over-year growth seen in March.

In the three weeks of May ending May 9, May 16, and May 23, the median national listing price posted an increase of 1.4 percent, 1.5 percent, and 3.1 percent year-over-year, respectively.

Locally, 77 of 100 large metros saw asking prices increase over last year.

In May 2020, the median national home listing price grew by 1.6 percent year-over-year, to a new high of $330,000.

This is a re-acceleration from the 0.6 percent year-over-year growth seen in April.

In June, the median national home listing price grew by 5.1 percent year-over-year, to a new high of $342,000.

This is an acceleration from the 1.6 percent year-over-year growth seen in May.

The nation’s median listing price per square foot also grew by 7.7 percent year-over-year, an acceleration from the 5.4 percent growth seen last month.

The July national median listing price was $349,000, up 8.5 percent year-over-year. Prices rose 7.8 percent in larger markets.

This is an acceleration from the 5.1 percent year-over-year growth seen in June.

The nation’s median listing price per square foot also grew by 9.5 percent year-over-year, an acceleration from the 7.7 percent growth seen in June.

The median national home listing price grew by 10.1 percent year-over-year, to a new high of $350,000 in August.

This is an acceleration from the 8.5 percent year-over-year growth seen in July.

The median national home listing price grew by 11.1% over last year, to $350,000 in September.

This is an acceleration from the 10.1% growth seen in August.

The nation’s median listing price per square foot also grew by 13.9% compared to last year.

Within the nation’s largest metros, the median listing price growth also accelerated compared to last month. Listing prices in the nation’s largest metros grew by an average of 9.3 percent compared to last year, an increase from the 8.9% gain seen last month.
Among the largest 50 metros, prices are increasing most in the northeastern housing markets, where they are now growing at an average rate of 12.8 percent year-over-year, compared to a growth rate of 10.9 percent for the midwestern metros, 8.7 percent for western metros, and 7.2 percent for southern metro housing markets.
All 50 of the nation’s largest metros saw year-over-year gains in median listing prices in September, up from 49 last month. Cincinnati, OH-KY-IN (+16.9%); Boston-Cambridge-Newton, MA-NH (+16.4%); and Philadelphia-Camden-Wilmington, PA-NJ-DE-MD (+15.6%) posted the highest year-over-year median list price growth in September.

Housing Price Growth in The Nation’s Largest Metros

Month 
Highest Year-Over-Year Price Gains
Highest Year-Over-Year Price Declines

May
Los Angeles-Long Beach-Anaheim, CA (+14.9%)
Detroit-Warren-Dearborn, MI (-3.4%)

Pittsburgh, PA (+14.0%); and Cincinnati, OH-KY-IN (+12.1%)
San Antonio-New Braunfels, TX (-3.2%)

—
Seattle-Tacoma-Bellevue, WA (-3.1%)

June
Pittsburgh, PA (+23.8%)
Miami-Fort Lauderdale-West Palm Beach, FL (-2.3%)

Los Angeles-Long Beach-Anaheim, CA (+21.4%)
Jacksonville, FL (-0.8%)

Cincinnati, OH-KY-IN (+16.6%)
Dallas-Fort Worth-Arlington, TX (-0.7%)

July
Pittsburgh, PA (+25.0%)
Miami-Fort Lauderdale-West Palm Beach, FL (-1.5%)

Los Angeles-Long Beach-Anaheim, CA (+24.3%)
Orlando-Kissimmee-Sanford, FL (-0.9%)

Cincinnati, OH-KY-IN (+18.5%)
—

August 
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD (+18.6 percent)
Miami-Fort Lauderdale-West Palm Beach, FL (-0.2 percent)

Cincinnati, OH-KY-IN (+17.8 percent)
—

Cleveland-Elyria, OH (+15.6 percent)
—

September 
Cincinnati, OH-KY-IN (+16.9%)
—

Boston-Cambridge-Newton, MA-NH (+16.4%)
—

Philadelphia-Camden-Wilmington, PA-NJ-DE-MD (+15.6%)
—

Housing Market Sales Trends
Homes for sale in September were being scooped up more quickly than last year, as pent-up buyer demand continues to fuel the fall season. The typical home spent 54 days on the market this September, which is twelve days fewer than last year and three days fewer than last month. In the 50 largest U.S. metros, the typical home spent 44 days on the market, and homes spent ten days less on the market, on average, compared to last September.
Among these 50 largest metros, the time a typical property spends on the market improved most in northeastern markets, where properties now typically spend 13 fewer days on the market than last year, followed by southern markets (-11 days), midwestern markets (-9 days), and western markets (-7 days).
Home sales generally pick up in the spring-summer season. People start shopping for new homes around Spring Break with the hope of moving over holiday weekends like Memorial Day weekend or moving during the summer when it has the least impact on their kids’ education.
This is why housing market predictions always include an increase in sales between March and September. The federal government’s shutdown of so-called non-essential businesses put a hold on most real estate transactions. The existing-home sales marked a three-month decline in sales (March to May) as a result of the coronavirus outbreak. This is the first time homes in September sold more quickly than in August since Realtor.com began tracking this data in 2016.
Existing-home sales continued to climb in September 2020, marking the fourth consecutive months of positive sales gains, according to the National Association of Realtors®. Home sales, which had gone on a declining spree due to social distancing & economic unpredictability, have now surpassed the pre-COVID levels.
The sales growth amounted to an annual rate of 6.54 million – up 9.4% from the prior month and nearly 21% from one year ago. Each of the four major regions witnessed month-over-month and year-over-year growth, with the Northeast seeing the highest climb in both categories.
Each of the four major regions experienced both month-over-month and year-over-year growth, with the Northeast seeing the greatest improvement from the prior month. The month of September recorded a spike of 9.4% in existing home sales from August and 20.9% from a year ago (5.41 million in Sep 2019), according to N.A.R. These include single-family homes, townhomes, condominiums, and co-ops.
Total existing-home sales that include single-family homes, townhomes, condominiums, and co-ops, jumped to a seasonally-adjusted annual rate of 6.00 million in August. The release date of September Existing-Home Sales by N.A.R. is October 22.
Single-family home sales sat at a seasonally-adjusted annual rate of 5.87 million in September, up 9.7% from 5.35 million in August, and up 21.8% from one year ago. The median existing single-family home price was $316,200 in September, up 15.2% from September 2019.
Existing condominium and co-op sales were recorded at a seasonally-adjusted annual rate of 670,000 units in September, up 6.3% from August and up 13.6% from one year ago. The median existing condo price was $272,700 in September, an increase of 9.9% from a year ago.
For four straight months, home sales have grown in every region compared to the previous month. Median home prices increased at double-digit rates in each of the four major regions from one year ago.

Housing Sales By Region – September 2020 (By N.A.R.)

Northeast
Existing home sales jumped 16.2%, recording an annual rate of 860,000, a 22.9% increase from a year ago.

The median price in the Northeast was $354,600, up 17.8% from September 2019.

Midwest
Existing-home sales jumped 7.1% to an annual rate of 1,510,000 in September, up 19.8% from a year ago.

The median price in the Midwest was $243,100, a 14.8% increase from September 2019.

South
Existing-home sales rose 8.5% to an annual rate of 2.80 million in September, up 22.3% from the same time one year ago.

The median price in the South was $266,900, a 13.0% increase from a year ago.

West
Existing-home sales rose 9.6% to an annual rate of 1,370,000 in September, an 18.1% increase from a year ago.

The median price in the West was $470,800, up 17.1% from September 2019.

First-time buyers were responsible for 31% of sales in September, down from 33% in both August 2020 and September 2019. Individual investors or second-home buyers, who account for many cash sales, purchased 12% of homes in September, a small decline from the 14% figure recorded in both August 2020 and September 2019. All-cash sales accounted for 18% of transactions in September, unchanged from August but up from 17% in September 2019.
Pending home sales experienced a minor decline in September after four consecutive months of contract activity growth, according to the National Association of Realtors®. While all four major U.S. regions recorded notable year-over-year increases, only the Northeast achieved month-over-month gains in pending home sales transactions.
NAR’s Pending Home Sales Index (PHSI), fell 2.2% to 130. Year-over-year, contract signings rose 20.5%. An index of 100 is equal to the level of contract activity in 2001. Three of four regional indices recorded decreases in contract activity on a month-over-month basis in September. The Northeast PHSI grew 2.0% to 119.4 in September, a 27.7% increase from a year ago. In the Midwest, the index slid 3.2% to 120.5 last month, up 18.5% from September 2019.
Housing Market Forecast 2021: Signs of Crashing Next Year?
With 10 years having now passed since the Great Recession, the U.S. has been on the longest period of continued economic expansion on record. The housing market has been along for much of the ride and continues to benefit greatly from the overall health of the economy. However, hot economies eventually cool and with that, hot housing markets move more towards balance.
Before the COVID-19 pandemic, Realtor.com’s national housing forecast was that home price growth will flatten, with an expected increase of 0.8 percent. Inventory was predicted to remain constrained, especially at the entry-level price segment. Mortgage rates were predicted to likely bump up to 3.88 percent by the end of the year.
Tight inventory coupled with rising mortgage rates would have lead to dropping sales. Buyers were expected to continue to move to affordability, benefiting smaller and mid-sized markets.
The housing market predictions were pointing out that all the housing indices would trend upward for the nation as a whole as well as in every state, including the top 100 metro areas. After the coronavirus pandemic came into being, the housing market forecast runs the gamut from optimistic to pessimistic. The pace of home sales relative to inventory reached a new record high in February, although hints of deceleration were beginning to surface.
The median existing-home price for all housing types in March was $280,600, up 8.0% from March 2019 ($259,700), as prices increased in every region. The median home price gains marked 97 straight months of year-over-year gains (nationally). In March, the unsold inventory was equal to a 3.4-month supply at the current sales pace, up from three months in February and down from the 3.8-month figure (from a year ago).
The fall in GDP associated with the coronavirus pandemic, and the rise in unemployment, is unprecedented. Despite that, there is little sign so far that the housing market is about to subside. Housing market predictions that take Covid-19 into account have already come out. Before the pandemic hit the nation the supply of new housing was failing to keep up with demand.
Social-distancing requirements are also likely to hold construction back in the coming months. With many sellers remaining on the sideline and a decline in housing starts, inventory will remain constricted. Under normal market conditions, prices would be expected to skyrocket as inventory declines at a faster rate, but buyer demand is expected to see-saw as the fourth wave of coronavirus pandemic pop-ups in winters.
Hence, home price growth will flatten, with a forecasted increase of just 1.1 percent. If the pandemic worsens further in the coming months, the sales are forecasted to take a hit as sellers might again de-list their properties and buyers would also stay away.
Capital Economics is estimating four million homes will be sold in 2020. This would be the lowest rate since 1991. For comparison, roughly 5.3 million homes sold in 2019. The trade war with China threatened international trade, creating a cloud that deferred business investment. Now we’re looking at a certain economic downturn due to the government’s choice to close the vast majority of businesses, nearly killing the service economy.
Experts think that the economic cost we’ve paid to try to contain the virus will weigh down the economy into 2021. That is why home sales are expected to be around six million in 2021 instead of the previously projected 6.3 million. Economic sentiment affected the U.S. housing market, too. The number of homes for sale fell nearly 16 percent in March 2020, after listings fell 15 percent year over year in February. This was equal to roughly 200,000 homes being taken off the market.
People were reluctant or unable to show their homes, while others are afraid it won’t sell and thus didn’t list their homes at all. US housing market predictions for the longer term will depend on the lingering impact of this virus. How long will it take for the economy to return to normal? How quickly will the service economy re-open and get people back to work?
Recovery is also expected to be uneven. Housing markets that are more heavily impacted should expect a slower recovery than markets that were hit less severely. If you’re wondering what the state of the housing market will be like over the next six months, especially if you’re an investor, then here is some good news for you.
The mismatch between supply and demand is driving prices higher, but this isn’t a housing bubble. While housing demand has been softening nationwide due to the pandemic and job losses, the market is in much better shape than a decade ago.
The housing market is well past the recovery phase and is now booming with higher home sales compared to the pre-pandemic period. For the first time since the pandemic began, all four major components of real estate activity—the demand, supply, pricing, and sales—are growing above the pre-COVID pace.
However, we may see home sales temper toward the latter part of 2020 and into 2021 if the unemployment rate stays elevated, but slower home sales are different than a busted housing bubble.
Many experts were predicting that the pandemic could lead to a housing crash worse than the great depression. But that’s not the case. The good thing, at least for buyers and investors alike, is that house prices have nearly flattened and are poised to remain stable in the latter half of this year.
The housing market forecast from Realtor.com shows that sales of homes will decline by 15 percent in the year 2020 as a whole. The home prices would flatten out. That’s compared to the original housing market forecast of a decline of 1.8 percent in home sales. Single-family housing starts, which were expected to increase by 10 percent in 2020, are now predicted to decline by 11 percent.

Home price growth will flatten, with a forecasted increase of 1.1 percent
Inventory will remain low, but the rate of decline steadies and the mix of homes for sale shifts toward greater availability of lower-priced homes
Mortgage rates remain low and may slide under 3 percent by the end of the year
Home sales are constrained by low inventory and diminished seller and buyer confidence as the effects of COVID linger in the labor market
Buyers seeking affordability and space drive interest in the suburbs

It’s mainly due to an unprecedented health crisis and economic uncertainty that has compounded this temporary restraint on real estate transactions. According to their statistics, the new listings have declined across the nation’s largest metros as sellers wait out the crisis. The positive forecast is that there is expected a short-term bump in sales for the early fall due to pent up buyer demand, fear of the pandemic reducing, and low mortgage rates.
According to Zillow, the housing market forecast for 2021 has improved but lingering economic uncertainty may temper some of the predictions.
The forecasts for seasonally adjusted home prices and pending sales are more optimistic than previous forecasts because sales and prices have stayed strong through the summer months amid increasingly short inventory and high demand.
The pandemic also pushed the buying season further back in the year, adding to recent sales. Future sources of economic uncertainty, including lapsed fiscal relief, the long-term fate of policies supporting the rental and mortgage market, and virus-specific factors, were incorporated into this outlook.

Housing sales expected to stay high but taper through 2021.
Seasonally adjusted home sales are expected to peak this fall then gradually decline through 2021.
Sales volumes overall are forecasted to remain higher than pre-pandemic levels throughout this year and next.
The home price forecast has been adjusted to higher for 2021.
Seasonally adjusted home prices are expected to increase by 1.2% from August to November and rise 4.8% between August 2020 and August 2021.
The previous forecast predicted a 3.8% increase in home prices over this time frame.

Courtesy of Zillow.com
Supply Forecast
While more sellers are comfortable entering the housing market compared to previous months, the lack of further improvement in newly listed properties signals that a return to normal conditions for the housing market is still just beyond reach at this time. The number of new listings is increasing, but they are quickly taken out of the market from heavy buyer competition and pent up demand.
Based on realtor.com data, the volume of new listings has also been trending lower over the past couple of months, as sellers across the country were reluctant to wade into uncertain U.S. housing markets. New listings are an important contributor to the volume of home sales, and a failure of new listings to improve beyond the current pace could prove to be an obstacle for further sales improvements.
Due to an ongoing constrain in new listings, the existing home sales are expected to be 15 percent lower in 2020. Inventory will remain low, but the rate of decline steadies and the mix of homes for sale shifts toward greater availability of lower-priced homes.
Sellers continue to be cautious, and further improvement could be constrained by lingering coronavirus concerns and economic uncertainty. A failure of new listings to improve beyond the current pace could prove to be an obstacle for further sales improvements, given their strong correlation with sales.
Sales Forecast
Home sales are constrained by low inventory and diminished seller and buyer confidence as the effects of COVID linger in the labor market. However, real estate activity has begun to see signs of improvement and growth. The housing sales recovery is strong, as buyers are eager to purchase homes and properties that they had been eyeing during the shutdown. This increase in buyer activity can go on for many months ahead as long as mortgage rates remain low and jobs continue to recover.
However, as demand for home buying remains super strong, even with a slight monthly pullback in September, we’re still likely to end the year with more homes sold overall in 2020 than in 2019. Capital Economics’ recent housing market predictions are that new and existing home sales will fall back over the remainder of the year. After rising to 5.3% y/y in the third quarter, growth will slow to 2.0% y/y by the end of next year.
Fannie Mae is assuming that the spike in unemployment will drag on the housing market for the entire year. This is why it is predicting a 15 percent drop in home sales for 2020 over 2019 numbers.
Realtor.com’s home sales recovery index saw continued signs of improvement in September as well. It remains above the pre-COVID baseline. The time-on-market index increased to 117.7, up 1.2 points from last week. It is 17.7 points above the January baseline, suggesting buyers and sellers are continuing to connect at a faster rate going into the fall.
However, further improvement in the pace of sales remains highly dependent on each market’s ability to contain COVID-19 and weather the economic impact. While pending contracts are at an all-time high, that will not necessarily translate to a record number of home sales because not all contracts lead to closings and due to sampling size variations. Due to the extremely tight supply, the complete recovery of sales for 2020 may not be sustainable.
For the year 2020: According to N.A.R,’s recent forecast, for all of 2020, existing-home sales are expected to increase by 1.1% compared to 2019, with sales ramping up to 5.4 million by the fourth quarter. According to their chief economist, Lawrence Yun, they are witnessing a true V-shaped sales recovery as homebuyers continue their strong return to the housing market.
For the year 2021, Yun projects existing-home sales to reach 5.86 million, supported by an economy that he expects to expand by 4% and a low-interest-rate environment, with a 30-year mortgage rate average of 3.2%.
New home sales are expected to be higher this year than last, and annual existing-home sales are now projected to be up – even after missing the spring buying season due to the pandemic lockdown.
HOTTEST REAL ESTATE MARKETS IN AMERICA 2020
According to Realtor.com’s Market Hotness Index, measuring time-on-the-market data and listing views per property, the east coast accounts for seven of the top 10 zip codes, with a focus in the northeast region. Although these markets were hit by the COVID-19 pandemic first, they were also some of the first to recover, with caseloads easing over time.
The resulting pent up demand has driven homebuyers back to these markets, but now with an increasing preference for neighborhoods outside of the dense city centers and more toward suburban areas. Affordability continues to be a key factor in attracting buyers to these neighborhoods.
The median listing price in the hottest zip codes was $335,000, up 1.8 percent year-over-year. However, these prices were 15 percent cheaper than their surrounding metros, on average, and essentially right in line with the national median price of $331,000 during the same period.
The top 10 zip codes follow the overall trend of homebuyers shifting their buying behavior in response to the pandemic by increasing their search toward less dense suburbs beyond urban city centers.

The 2020 Hottest ZIP Codes in America by Realtor.com

Rank
Zip Code
Zip Name
Views Per Property Y/Y
Median Days on Market
Median Listing Price

1
80911
Colorado Springs, CO
38%
13
$287,000

2
43068
Reynoldsburg, OH
69%
17
$204,000

3
14617
Rochester, NY
44%
18
$162,000

4
2176
Melrose, MA
14%
19
$644,000

5
4106
South Portland, ME
5%
21
$377,000

6
66614
Topeka, KS
99%
19
$184,000

7
3051
Hudson, NH
45%
22
$350,000

8
1602
Worcester, MA
45%
21
$318,000

9
22152
Springfield, VA
41%
7
$553,000

10
27604
Raleigh, NC
81%
25

Before the coronavirus pandemic began, the U.S. housing market was already short from the supply side. Years of slow home-building activity coupled with the ongoing financial crisis point to the fact that the number of homes for sale would still fall well short of demand in the coming months.
Housing market experts predict that sharp declines in the prices look improbable as the buyer demand has remained relatively strong despite the pandemic. A lot of new buyers want to purchase a house and while investors have taken a pause.
The housing market 2020 was running at a record pace in the early stages of the coronavirus outbreak in February 2020, with sellers continuing to gain leverage, and buyers benefit from lower mortgage rates. We saw some of the best home sales and housing starts to pace in more than a decade until February 2020.
As the population of millennials is increasing, the demand side of housing remains strong. Many buyers need to get into a larger home because they have a growing family. Those interested in purchasing homes are looking at the enticing low mortgage rates. According to Freddie Mac, mortgage rates continue to slowly drift downward.
Record-low mortgage rates are likely to remain in place for the rest of the year, and all the Fed’s policymakers foresee no rate hike through 2022. It’s highly likely that you’ll start to see those long-term rates remain low and potentially slip a bit lower in tandem with short-term borrowing costs. That means refinancing could be a smart option for your pocketbook.
A reduction in even just a quarter of a percentage point could potentially shave off a couple of hundred dollars from your monthly payments. This will be the key factor driving housing demand as state economies steadily reopen.
We can expect a wave of mortgage refinances to save money. Fannie Mae predicts 40% more mortgage refinances in 2020 than 2019. To help borrowers and renters who are at risk of losing their home due to the coronavirus national emergency, the Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac (the Enterprises) are extending their moratorium on foreclosures and evictions until at least until December 31, 2020—originally moratorium was supposed to expire at the end of August.
That gives potential home sellers hope, though it will take time for these low-interest rates to offset the spike in unemployment and general economic malaise. The foreclosure moratorium applies to Enterprise-backed, single-family mortgages only while the REO eviction moratorium applies to properties that are acquired by Fannie or Freddie through foreclosure or deed-in-lieu of foreclosure transactions.
The moratorium is expected to cost the two government-sponsored enterprises between $1.1 billion and $1.7 billion, and it protects more than 28 million homeowners across the country.
Current Economic Situation
The pandemic cost 22 million payroll jobs in March and April, and about 9 million have been recovered through July. But more recently, job openings appear to have stalled, and other statistics indicated that the labor market remains in the grips of recession. On August 27, the Labor Department said that the number of Americans applying for jobless benefits topped 1 million last week, just as it has most weeks since late March.
That’s about four times the number of average weekly applicants before the pandemic. And the near-term job prospects are dim for people in service industries such as restaurants, hotels, travel, and entertainment. According to the U.S. Bureau of Labor Statistics, as of July, the U.S. unemployment rate stood at 10.2 percent.
The rate is encouraging when compared to previous months but is still above the highest rate during the Great Recession—10 percent in October 2009. These improvements in the labor market reflected the continued resumption of economic activity that had been curtailed in March and April due to the coronavirus (COVID-19) pandemic.
At the same time, the stimulus package that Congress passed in March was more than double the financial aid offered during the last downturn.
Real gross domestic product (GDP) decreased at an annual rate of 31.7 percent in the second quarter of 2020, according to the “second” estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP decreased by 5.0 percent. The GDP estimate released today is based on more complete source data than were available for the “advance” estimate issued last month.
In the advance estimate, the decrease in real GDP was 32.9 percent. With the second estimate, private inventory investment and personal consumption expenditures (PCE) decreased less than previously estimated.
Current-dollar GDP decreased 33.3 percent, or $2.07 trillion, in the second quarter to a level of $19.49 trillion. In the first quarter, GDP decreased by 3.4 percent, or $186.3 billion.
The price index for gross domestic purchases decreased by 1.5 percent in the second quarter, in contrast to an increase of 1.4 percent in the first quarter (table 4). The PCE price index decreased 1.8 percent, in contrast to an increase of 1.3 percent. Excluding food and energy prices, the PCE price index decreased 1.0 percent, in contrast to an increase of 1.6 percent.
The decline in second-quarter GDP reflected the response to COVID-19, as “stay-at-home” orders issued in March and April were partially lifted in some areas of the country in May and June, and government pandemic assistance payments were distributed to households and businesses. This led to rapid shifts inactivity, as businesses and schools continued remote work, and consumers and businesses canceled, restricted, or redirected their spending.
Courtesy of Bea.gov
In addition to presenting updated estimates for the second quarter, the latest release from the Bureau of Economic Analysis presents revised estimates of first-quarter wages and salaries, personal taxes, and contributions for government social insurance, based on updated data from the BLS Quarterly Census of Employment and Wages program.
Wages and salaries are now estimated to have increased by $103.6 billion in the first quarter of 2020, a downward revision of $3.4 billion. Real GDI decreased 2.5 percent in the first quarter, unrevised from the previously published estimate.
Profits from current production (corporate profits with inventory valuation and capital consumption adjustments) decreased $226.9 billion in the second quarter, compared with a decrease of $276.2 billion in the first quarter.
The full economic effects of the COVID-19 pandemic cannot be quantified in the GDP estimate for the second quarter of 2020 because the impacts are generally embedded in source data and cannot be separately identified. For more information, see the Technical Note on BEA’s Web site.
The Federal Reserve says it will keep buying bonds to maintain low borrowing rates and support the U.S. economy during a recession. It intends to keep the interest rates at rock bottom for even longer than previously expected after a major policy shift that has profound implications for Wall Street, workers, and savers.
The economy is expected to shrink by 6.5% this year, in line with other forecasts, before expanding 5% in 2021. The Federal Reserve foresees the unemployment rate at 9.3%, near the peak of the last recession, by the end of this year. The rate is now 13.3%. The whole new policy aims to address the immediate economic problems caused by the pandemic-induced downturn.
But knowing that the Fed’s benchmark rate is likely to stay at its current level of near zero for a long time — analysts say that could be several years — might give companies more confidence to invest and hire.
Employers and households also could benefit from cheaper borrowing rates for houses, cars, and other loans. And over the long run, if an extended period of low-interest rates supports economic growth, that could lead to further drops in unemployment, which in turn could help disadvantaged workers who are typically the last to benefit from a long economic expansion.
Over the long term, the U.S. will probably face slower growth, a weaker dollar, and a huge debt related to paying for the crisis response.
What will 2021 be like for buyers? Economic activities are ramping up in all the sectors, mortgage rates trend at historic lows, and jobs are also recovering. Record low mortgage rates are providing opportunities for buyers to lock-in low monthly mortgage payments for future years. The latest housing market trends show that prices are rising in most parts of the country and most price segments because of the lack of supply.
Although growth in supply remains below the normal seasonal pace it continues to improve as buyers anxiously await more sellers to put fresh new homes for sale on the market. Tight housing inventory was the issue for buyers before Covid-19 as well. Due to this persistent shortage of housing, some experts predict that the median home price for the country as a whole could easily rise by 10% cumulatively over the next two years.
If you qualify for a mortgage, you have a more limited selection and prices close to what they were before the coronavirus hit, but you have relatively little competition. In response to the COVID-19 national emergency, borrowers with financial hardship due to the pandemic have been able to receive forbearance, which is a pause or reduction in their monthly mortgage payment. Borrowers can request an additional six months if needed. FHA does not require lump sum repayment at the end of the forbearance.
An important step in this direction was the announcement of the payment deferral option for borrowers. The Federal Housing Finance Agency (FHFA) announced on May 13 that Fannie Mae and Freddie Mac (the Enterprises) are making available a new payment deferral option. The payment deferral option allows borrowers, who can return to making their normal monthly mortgage payment, the ability to repay their missed payments at the time the home is sold, refinanced, or at maturity.
What will 2020 & 2021 be like for sellers? Expect homes to be slow to sell, and you may have to market it down to move it. Or you may need to wait a few months to see things shift from a buyer’s market to a balanced market. The only exception would be the “affordable” homes that are in short supply. In this case, you face a seller’s market as soon as people are allowed to go out shopping.
What will 2021 be like for investors? Many investors who primarily acquired at the courthouse foreclosure auction are migrating to buy bank-owned (REO) homes via online auction, which also provides the added benefit of safety from viral exposure. The added competition for these homes due to the moratorium on foreclosures could drive up the prices in the distressed housing market.
While for someone looking to buy a home and then immediately flip it seems a bit difficult because it’s not clear where real-estate prices will go. On the other hand, investors looking to buy a home and hold onto it in the long term, particularly as a rental property, won’t face as much risk. According to a recent survey from Auction.com, 64% of investors who primarily buy investment properties as rentals said they planned to increase or keep their acquisitions, despite the pandemic.
Even though the housing market likely won’t be the cause of the next recession, an economic downturn would still have an impact on the US real estate sector. The spillover to the housing market will rely upon the profundity, length, and severity of the 2020 recession and, if some parts of the country feel the effect worse than others, some local housing markets could see greater effects.
“The current economic expansion is getting long in the tooth by historical standards, and more late-cycle signs are emerging,” said Scott Anderson, chief economist at Bank of the West, who was among those predicting a 2020 recession.
According to a survey published by WSJ, some 59% of private-sector economists surveyed in recent days said the economic expansion that began in mid-2009 was most likely to end in 2020. An additional 22% selected 2021, and smaller camps predicted the next recession would arrive the following year, in 2022 or at some unspecified later date.
In a research report in which Zillow surveyed 100 real estate experts and economists about their predictions for the housing market, it disclosed that almost 50% of all survey respondents said the following recession will initiate in 2020, with the first quarter of the year referred to the most as to when the recession will start.
The main culprit for the housing recession: monetary policy. The experts predicted that monetary policy will be the deciding factor this time around. In particular, they argued that the Federal Reserve could prompt slower growth if it raises short-term interest rates too quickly.
To put it simply, the US housing market is ripe for investment in 2020, making it a great time to buy a rental property for sale to increase your cash flow. A multi-generational housing market is creating limited supply and increased competition, driving up prices at the affordable end of the market for the foreseeable future. In hot job markets and communities that fit the youngest generation’s ideals, price increases of 8-15 percent are possible year-over-year.
For everyone else, real estate is appreciating at or just above the rate of inflation. The home price appreciation rate has slowed so far but prices are still rising. While many economists predict that home prices will continue to rise, much will depend on the economy’s ability to bounce back from the pandemic.
Housing Affordability Overview 2020
Housing Affordability is driven largely by the gap between household income and home value. It is influenced by the balance between housing supply and demand, the labor market, and mortgage rates by way of Federal monetary policy. Housing is affordable when the housing of an acceptable minimum standard can be obtained and retained leaving sufficient income to meet essential non-housing expenditure.
The most commonly used indicator in the US and many other countries is the ratio of house prices to incomes or earnings. A higher ratio indicates relatively more affordability. A ratio of 100 indicates that median- family income is just sufficient to purchase the median-priced home. Ratios above 100 indicate that the typical household has more income than necessary to purchase the typical house.
Therefore, low-income households spending a high proportion of their income on housing may and vice versa. To afford a typical mortgage payment, a given family needs to spend no more than 25% of income on its mortgage payment (for a 30-year fixed-rate mortgage with a 20% down payment).
Households spending more than 25% of the income on housing costs are likely to face financial burden or stress. Qualifying income is derived from the monthly payment on the median-priced existing home, at the effective mortgage interest rate.
Affordability was already a problem for the US housing market before the coronavirus hit. There was a shortage of affordable housing, driving up the cost of the homes Millennials can afford. This is important since half of all home mortgages are given to Millennials. And they are forced to compete for new housing stock since Boomers and Generation Xers tend to hold onto their homes. The housing affordability index determines the affordability of the housing market by comparing the median household income to the median home price.
The national housing affordability index was 170.0 for February 2020. That was a nearly one percent increase from the prior month and an eight percent increase from a year before. An affordability index of 100 would mean that the average person could afford the average home. An increasing affordability index means more people are priced out of the housing market. The economic fallout of the coronavirus is probably going to make housing less affordable, not more so. The official unemployment rate jumping ten percentage points or more means many people are out of work.
In June, employment in leisure and hospitality rose sharply. Notable job gains also occurred in retail trade, education and health services, other services, manufacturing, and professional and business services. All of this adds up to tens of millions of households seeing their income drop, many of them substantially. And home prices will remain steady or drop just a few percentage points. The result is a dramatic drop in the average household income while the housing portion of this equation is almost unchanged. We could easily see the housing affordability index hit 200.
This is one of the more certain housing market predictions. Another factor affecting this equation is the rising average price of new homes. Homebuilders were already prioritizing luxury homes over affordable and/or starter homes. This is why the median home price was rising in 2019. We can expect home builders to focus their limited manpower and resources on luxury homes that will sell for more. And that will worsen the housing affordability index as long as the economic crisis continues.
However, the housing market forecast should not affect your decision to buy a home. Instead, you should make the decision to buy a home based on your economic situation. Pessimistic housing market predictions may scare some from listing their home, but many motivated sellers will list their property. That may contribute to a decline in sale prices, but it presents an excellent buying opportunity.
An April Realtor.com survey found out that after spending many long weeks confined in their homes, consumers’ preferences shifted toward bigger homes and more outdoor space for their next homes. The share of home buyers looking at suburban markets near large cities and even across state lines is showing a rebound, as consumers look to a post-pandemic landscape, with cities in the Southeast seeing renewed interest.
What Makes Housing Affordable?
Lower mortgage costs and median income rises are the two important factors that make housing relatively more affordable. In 2020, historically low mortgage rates are certainly making home purchases more affordable. People still want to own homes, and with mortgage rates low, a lot of people are taking advantage of that even though there is an apparent economic slump.
The homeownership rate reached 67.9% in the second quarter of 2020, according to a recent report from the U.S. Census Bureau. That’s up from 65.3% of Americans owning their residences in the first quarter of the year and 64.1% in the second quarter of last year. The homeownership rate of 67.9 percent was 3.8 percentage points higher than the rate in the second quarter 2019 (64.1 percent) and 2.6 percentage points higher than the rate in the first quarter 2020 (65.3 percent).
The 30-year fixed-rate averaged 3.57% in the first quarter of 2020, down from 4.62% one year ago. The average monthly mortgage payment on a 30-year fixed-rate mortgage with a 20% down payment was $995, down from $1,048 a year ago. The current 30-year fixed-rate is averaged 3.15%. When refinancing a $200,000 outstanding loan balance into a 30-year fixed-rate mortgage, at the recent 50-year low average mortgage rate of 3.15%, your monthly mortgage payment would now be $859.
The national median family income for the United States for FY 2020 is $78,500, an increase of almost four percent over the national median family income in FY 2019, according to U. S. Department of Housing and Urban Development. This ($859 mortgage payment) is about 13% of the median family income of $78,500, down from about 16% one year ago.
Courtesy of Freddiemac.com
To afford a typical mortgage payment, a given family needs to spend no more than 25% of income on its mortgage payment (for a 30-year fixed-rate mortgage with a 20% down payment). The income that is needed for this scenario decreased to $47,760, down from $50,304 one year ago.
The national median sales price of existing single-family homes was up 4.2 percent in Q2 2020 to $291,300 and up 5.9 percent to $280,200 based on the Trailing Twelve Month (TTM) average of quarterly median prices according to the National of Association of Realtors® (NAR).
For the US, at the 5% down-payment threshold, the qualifying income amount for the second quarter of 2020 was $58,613. At the 10% down-payment mark, the qualifying income was $55,528 and with a 20% down-payment, the income required to qualify for a mortgage was $49,358. The West led all regions with the highest qualifying income while the Midwest had the lowest income for 5%, 10%, and 20% down payments on a single-family home.
A household is said to be cost-burdened when it pays more than 30 percent of its income toward housing expenses. As a more extreme measure, a household is said to be severely cost-burdened when it pays at least 50 percent of its income toward housing expenses. With today’s mortgage rates at historic lows, you can refinance your mortgage to lower your monthly payments and improve your financial situation.
With rates at or near historic lows, refinancing could help you save by reducing your monthly payments and reducing the total amount of interest that you pay over the life of the loan. Also, the mortgage rates continue to slowly drift downward with a distinct possibility that the average 30-year fixed-rate mortgage could dip below 3 percent later this year.
Courtesy of Census.gov
National vacancy rates in the second quarter of 2020 were 5.7 percent for rental housing and 0.9 percent for homeowner housing. The rental vacancy rate of 5.7 percent was 1.1 percentage points lower than the rate in the second quarter 2019 (6.8 percent) and 0.9 percentage points lower than the rate in the first quarter 2020 (6.6 percent). The homeowner vacancy rate of 0.9 percent was 0.4 percentage points lower than the rate in the second quarter 2019 (1.3 percent) and 0.2 percentage points lower than the rate in the first quarter 2020 (1.1 percent).
Current economic conditions resemble a “swoosh” pattern, with the initial impact from the lockdown followed by a gradual recovery as the economy reopens. If the reopening is followed by a second wave of the COVID pandemic leading to a second shutdown, the “double-dip” is a possible result (W-shaped recovery). In either case, the overall outlook points to declining rent growth in the short term followed by a gradual period of recovery.
Courtesy of Census.gov

References:
Latest Housing Market Statistics

June 2020 Monthly Housing Market Trends Report: Lack of Inventory Continues to be Buyers’ Biggest Hurdle in June

May 2020 Monthly Housing Market Trends Report: Key Housing Indicators Begin to Turn Around in May

https://www.nar.realtor/research-and-statistics/housing-statistics/

2020 Housing Market Predictions – COVID-19 Update

https://www.marketwatch.com/story/fannie-mae-home-sales-will-decline-by-nearly-15-in-2020-due-to-coronavirus-2020-04-15
https://www.cnbc.com/2020/03/19/coronavirus-update-home-sales-could-fall-by-35percent-as-spring-market-stalls.html
https://www.cnbc.com/2020/04/15/coronavirus-homebuilder-confidence-takes-biggest-one-month-dive-in-history.html?recirc=taboolainternal
Current avg. home prices and forecast
https://www.zillow.com/home-values/

2020 Housing Market Predictions – Realtor.com

Housing construction, demand, and supply
https://www.statista.com/statistics/226144/us-existing-home-sales/

The U.S. is relaxing rules for medical professionals working across state lines

https://www.enterprisebank.com/insights/construction-industry-suppliers-pace-covid19-impact
https://www.constructiondive.com/news/6-ways-the-coronavirus-outbreak-will-affect-construction/574042/
Affordability index (nationally) – Median household income vs median home price
https://www.investopedia.com/terms/a/affordability-index.asp
https://ycharts.com/indicators/reports/monthly_housing_affordability_index
https://www.nar.realtor/newsroom/metro-home-prices-rise-in-96-of-metro-areas-in-first-quarter-of-2020
Factors affecting the 2020 housing market
https://www.curbed.com/2018/12/17/18144657/construction-homebuilding-housing-costs-renovation-labor
Where Is the Housing Market Headed In 2020
https://www.investopedia.com/investing/next-housing-recession-2020-predicts-zillow/ 
https://www.forbes.com/sites/alyyale/2019/07/08/housing-market-check-in-6-expert-predictions-for-the-second-half-of-2019/#2e97885a18ba
2020 and Beyond Forecast
https://www.daveramsey.com/blog/real-estate-trends
https://www.investopedia.com/personal-finance/how-millennials-are-changing-housing-market
2020 Economic Outlook
https://www.bea.gov/data/gdp/gross-domestic-product
https://www.businessinsider.com/us-housing-market-sudden-lack-of-consumer-interest-coronavirus
https://www.washingtonpost.com/business/2020/04/16/unemployment-claims-coronavirus/
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