Experts See a Housing Market Recovery Toward the End of 2020

Key highlights from this report:

  • The U.S. housing market has slowed in response to the coronavirus pandemic.
  • But a growing number of analysts predict a housing recovery later in 2020.
  • Experts are also drawing distinctions between this downturn and the 2008 crash.

The ongoing coronavirus pandemic has shaken the U.S. economy and slowed the housing market to a crawl. Home sales have declined in cities across the U.S., and house prices are expected to level off — or even dip — in some markets.

But this a temporary condition. While no one can predict future housing trends with complete accuracy, a growing number of experts expect to see a housing market recovery starting later in 2020.

Experts See Real Estate Market Recovery Later in 2020

We’ve entered uncharted territory. Never in our lifetimes have we seen a global pandemic push the global economy into a recession. But that’s where we find ourselves today, as of spring 2020.

Most of our economic woes are self-inflicted. Government-issued stay-at-home orders (while necessary to slow the spread of the virus) have led to business closures, layoffs, and rising unemployment.

All of this has had a cooling effect on the nation’s real estate market. But some experts see a U.S. housing market recovery starting later in 2020. Such a recovery could actually help pull the broader economy out of the doldrums.

Here are some of those forecasts and predictions:

Javier Vivas: Market Could Recover Quickly or Slowly

Javier Vivas, director of economic research for Realtor.com, thinks we’ll have either a V-shaped or U-shaped recovery scenario. “V-shaped” refers to a sharp decline, followed by a sharp and strong recovery. The U-shaped scenario would be similar, but with a more gradual rebound.

Both scenarios would involve a slowdown in real estate market activity during spring and summer of 2020, followed by a recovery period later in the year.

Regarding the V-shaped scenario, Vivas wrote that home sales in the U.S. could “drop sharply during the second quarter, then quickly recover through the summer and into the fall and the end of [2020].”

In the equally possible U-shaped scenario, the housing market would see “declines in the second quarter extending through the fall, then slowly recovering through the end of the year.”

Sam Khater: ‘Recovery Starting in the Second Half of 2020’

Sam Khater, chief economist for the mortgage-buying giant Freddie Mac, also expects to see a real estate market recovery during the second part of the year.

In a report published on April 13, Khater wrote:

“Although the uncertainty of the crisis means forecasts of economic activity are more unclear than usual, we expect that most of the economic damage from the virus will be contained to the first half of the year. Going forward, we should see a recovery starting in the second half of 2020…”

He added that it will take some time for the broader economy to bounce back. In fact, the real estate market could actually help stimulate the U.S. economy later this year and into 2021.

Eric Fox: A ‘Return to Normal’ Later in the Year

Eric Fox, V.P. of Economic Modeling for Veros Real Estate Solutions, recently shared his thoughts on this subject.

In an April 6 news release, he said that his company expects to see a “mild forecast depreciation on average for the next quarter with a return to normal [home price] appreciation rates later in the year and into 2021.”

That report also noted that some local housing markets are in better shape than others, going into the downturn. They pointed to markets like Boise, Idaho and Spokane, Washington as being the “strongest” over the next 12 months. Real Estate markets in Illinois and Connecticut were seen as being the weakest or “least performing” over the next year.

Another Common Theme: Things Are Different This Time

Another common theme among these outlooks and predictions has to do with the severity of the housing market downturn. Many economists and real estate analysts are drawing clear distinctions between the current market slowdown and the full-scale housing crash that started in 2008.

The general consensus seems to be that the housing market is entering the current downturn in much better shape than in 2008. So the downturn is expected to be shorter and less severe than the last one.

Realtor.com’s Javier Vivas wrote: “While sales could temporarily drop to similar levels seen in the last recession … the new Covid inspired recession may be shorter and less pronounced.”

Lawrence Yun, chief economist for the National Association of REALTORS®, pointed out the differences between this housing slowdown and the one that preceded the Great Recession.

“Worth noting that, unlike 2008, there is no subprime lending and overproduction by home builders,” Yun wrote. “Sales will tumble for a few months but prices will hold on … any lost sales are likely to show up as a delayed transaction in the second half of the year.”

Today’s Housing Market Is Stronger Than in 2008

Mark Fleming, chief economist for First American Financial Corporation, recent stated that the U.S. real estate market might be in better shape than many people realize. It’s not overvalued and overbuilt, as it was during the previous boom that went bust.

According to Fleming:

“[T]he coronavirus outbreak has taken hold of the domestic and global economy. The housing market is not immune to its impact but may be in a better position than many believe.”

There’s still a lot we don’t know at this stage. It’s an evolving situation. But there also appears to be a general consensus emerging. Many analysts now believe that the U.S. real estate market will weather the current storm much better than it did twelve years ago.

Disclaimer: This report contains real estate market predictions and forecasts from third-party sources not associated with the publisher. Such forecasts are the equivalent of an educated guess and should be treated as such.