Will the Residential Housing Market Rebound in Q3?
NAR chief economist Lawrence Yun, speaking at the NAR conference in San Francisco in November 2019. Photo credit: Ralph Bivins, Realty News Report.
WASHINGTON, D.C. – (By Dale King, Realty News Report) – Home no longer means the mahogany-furnished, picture-perfect house of midcentury America. Two decades into the 21st century, technology and mobile devices have already reshaped daily life and how people relate to one another.
Then, just months ago, a much more abrupt shift arrived. Government guidance and legal orders to “stay home, stay safe” forced billions to live, work and learn inside their residences. Suddenly homes became shelters, offices, classrooms, medical care spaces and safe zones. The coronavirus upended routines and introduced a pervasive fear of an unseen threat.
The virus spread to all 50 states, brought large sectors of the economy to a halt and contributed to the loss of at least 26 million jobs as stores, restaurants and many “non-essential” services shut down.
That upheaval generated a flood of forecasts about the future of schools, businesses, families, houses of worship and government. Companies of every size paused operations or shifted to producing equipment and supplies needed to fight COVID-19.
The housing market quickly became a measure of the economy’s health. Economists, Realtors and analysts worked to chart a path forward and stabilize a market facing serious stress.
“Home sales all but ceased this spring,” said Ken H. Johnson, an economist at Florida Atlantic University’s College of Business. He warned that fallout could resemble the housing collapse of more than a decade ago.
“Many house hunters won’t feel comfortable making such a major decision during the pandemic,” Johnson said. “Those who do may struggle to secure financing. Social distancing has limited in-person house visits, and virtual tours aren’t an adequate substitute for many buyers.”
Mask mandates moved rapidly from suggestion to requirement in many places. Meetings, entertainment, religious services and gatherings migrated online to platforms such as Zoom, Facebook and YouTube. Travel dropped sharply, and energy markets weakened, sometimes producing startlingly low oil prices.
The coronavirus’s impact across the U.S. has been uneven. Hard-hit regions include parts of the Northeast, the West Coast and the Pacific Northwest, while many Midwestern areas faced less acute outbreaks.
Despite some ongoing activity, pending home sales fell sharply. Redfin reported pending U.S. home sales down 54 percent for the seven days ending April 10 compared with the same period in 2019. Many sellers pulled listings or held off entering the market, creating pent-up demand among buyers.
Redfin noted about 750,000 homes were for sale nationwide at that time, compared to nearly one million a year earlier. The median listing price edged down slightly from $309,000 to $305,000 during the seven days ending April 10, reflecting constrained supply amid steady buyer interest.
The industry adapted quickly, moving from face-to-face interactions to virtual experiences. Virtual tours, electronic contracts and remote closings surged. Agents such as Mara Gemond in Virginia say these technological changes are likely to remain part of the business.
The National Association of Realtors described the shift: “A quarter of Realtors with clients putting contracts on homes this week had at least one do so without physically seeing the property… For those clients, the median number of homes toured – either virtually or in person – was just three. NAR’s 2019 Profile of Home Buyers and Sellers found buyers typically looked at nine homes before placing a contract on a home.”
Redfin has pushed virtual tools, encouraging customers to “tour homes without leaving your couch.” The company expanded its Direct Access technology beyond properties it owns to include vacant listings in Denver, Houston and Las Vegas in response to buyer and seller demand.
Redfin summarized the market’s backslide: at the start of March the housing market was strong, with February marking the eighth straight month of gains in home sales. By the end of March, however, the pandemic had thrown the market into disarray.
The downturn affected Redfin directly: it laid off 7 percent of its corporate workforce and furloughed roughly 40 percent of its agents in early April.
By April, Redfin reported that while listings plunged and sales slipped, the U.S. median home sale price continued to rise year over year, reaching $303,200 — up 7.1 percent compared with the prior year and 3.3 percent month over month.
March home sales, only partially affected by shutdowns, fell 9.1 percent nationwide from February — the largest month-to-month drop on record. Sales also declined 1.2 percent year over year in March, the first annual drop in nine months, and by the last week of the month were 11.5 percent below the same period a year earlier.
April showed signs of stabilization. For the seven days ending April 19, Redfin reported home-buying demand down 19 percent after an early-April low of 34 percent.
Financial uncertainty complicated deals. “My clients just accepted an offer with 30 days for the buyers to get their financing approved when it should have taken two weeks or less,” said Irma Jalifi, a Redfin agent in Houston. “I worry the house will be off the market for a month and the deal still won’t come together. In this market, you’re damned if you do, damned if you don’t.”
Houston saw strong March sales, but pending sales suggested a drop in April. The energy sector’s downturn and layoffs, alongside falling oil prices, added further pressure to the local housing market.
Looking ahead, NAR Chief Economist Lawrence Yun predicted second-quarter home sales would slow under widespread stay-at-home orders but expected activity to pick up as the economy reopens, since many potential buyers and sellers said they remain interested in the market.
Yun added that home prices have held steady because transactions continue to occur thanks to technology. “Remarkably, 10% of Realtors report the same level of or even more business activity now than before the economic lockdown,” he said.
Ken Johnson of FAU said that if an effective treatment or vaccine arrives soon, home prices might fall only 5 to 10 percent before recovering quickly. But a prolonged search for a cure could push the housing market toward levels seen during the 2006–2011 recession.
He cautioned that while a severe price collapse is not the most likely outcome, the nation has experienced similar crises before and that predicting the market will require both data and common sense.
Housing economist Ralph McLaughlin of Haus Inc. noted that targeted government programs—such as mortgage forbearance and homeowner payment relief—could help stabilize and even improve prices in some markets.
Many analysts see the third quarter as the earliest likely turning point, with a gradual recovery afterward. Freddie Mac emphasized that uncertainty around the pandemic’s duration makes forecasting difficult and assumed most economic damage would be concentrated in the year’s first half. Their baseline projected recovery beginning in the third quarter, with a full return to pre-crisis conditions taking about a year.
Freddie Mac also predicted a significant deviation from the typical spring housing surge: at a seasonally adjusted annual rate, home sales could fall 45 percent in the second quarter of 2020, then slowly rebound over the subsequent year to the level seen in the first quarter.
