Home Sales Will Decline in 2020 — But By How Much?
Last year, economists predicted that 2020 would be a strong year for the housing market. However, due to the COVID-19 pandemic, home sales are set to plunge in the months ahead.
In the last few weeks, the number of homes for sale on realtor.com® has plummeted by nearly 50% as sellers are pulling them off the market or holding off on listing their homes. In addition, a new report from Fannie Mae projects that home sales will fall by nearly 15% in 2020. Issues with both supply and demand are expected to contribute to the decline in home sales. On the demand side, the rapid rise in unemployment will decrease many Americans’ ability to afford a home purchase. On the supply end, home sellers are pulling their homes from the market.
“On the supply side, the number of listings is falling, as those with homes to offer may either be hesitant to allow strangers to tour their home or worry that the lack of demand is placing downward pressure on the sales price they might otherwise receive,” said Fannie Mae chief economist Doug Duncan.
“The historically rapid decline in economic activity, the accompanying employment loss, and our limited, though improving, understanding of COVID-19 make this a particularly challenging forecast environment [...] The variability around this forecast is wide, and is dependent on the incidence, severity, and duration of the virus, as well as the response of the public and policy makers to new information.”
Fannie Mae expects both the U.S. economy and home sales to rebound in 2021. However, that rebound is very much dependent on the pandemic’s trajectory.