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2020 has been a rollercoaster ride in seemingly every aspect of life. The apparently normal beginning of the year quickly transitioned to economic lockdowns and social distancing as a result of the global pandemic.
Wearing masks has become the new fashion trend, seemingly stable employment for millions abruptly ended, millions more are now working from home, and the stock market went from setting all-time highs to dropping over 30% before bouncing back to set record highs once again.
Everything has been going haywire, and real estate has been no exception.
In March, the housing market sputtered as both buyer and seller uncertainty skyrocketed. Homebuyer optimism fell from 75% to 43%, putting a hold on purchases for many. On the selling side, real estate agents reported that the number of sellers who removed their homes from the market went up from 3% to 16%.
This combination of lower homebuying confidence and lower housing supply stalled the housing economy during March and April, but the housing market started picking back up in May and into the summer months.
Just like the temperatures in summer, the housing market has been hot. Homes are being bought up quickly, and prices are going up in most markets across the country. Homebuyers who put off their purchase from the spring are actively looking at homes alongside the summer shoppers. Encouraged by record low mortgage rates, homebuyers are aplenty.
Conversely, the housing supply has not appeared in such abundance. Homebuilders have been working hard to keep up with the demand, but some supply chain delays due to the pandemic have delayed construction activities.
As for sellers, federal intervention has prevented a glut of supply from hitting the market from the spike in unemployment. The CARES Act, which provides boosted unemployment compensation, along with mortgage forbearances for mortgages backed by Fannie Mae, Freddie Mac and Ginnie Mae, have enabled many unemployed homeowners to avoid foreclosure.
Where Is the Real Estate Market Going?
Predicting the house market is notoriously difficult. With so many forces pulling on the economy in different ways and the ability for these forces to abruptly change course, it is impossible to predict with absolute certainty.
The abundance of demand witnessed this summer will likely curtail into the fall and through the end of the year with the traditionally slower months for housing transactions. This could result in a flattening of the housing price trend and perhaps a slight pullback from the sizable jump seen thus far this year.
Regulatory forces continue to prop up the housing market with historically low mortgage rates, extended federal unemployment benefits, and mortgage forbearance programs. Should these upward forces lose strength, a more pronounced drop in the housing market could be seen.
The rebound of the economy to record highs and an upward trend in overall consumer sentiment have contributed to the elevated housing demand. If the severity of the pandemic decreases, these trends will likely continue and add further strength to the nationwide housing market.
2020 has been wild to say the least, and it’s not over yet. The housing market has had an incredible story thus far there are more chapters to write. Time will reveal how the housing market will behave amid such a volatile period in our history.
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