The weather is cooling off, the kids are going back to school, fall is almost here, and the 2020 housing market is about to hit a new stride… or is it? The spring and summer markets took us all by surprise when so many thought we were headed for a quick crash, so what are the predictions for this fall market?
Many experts predicted that by this time we would be looking at a market crash as people would have been too nervous about COVID-19 to house hunt. It was as fair a prediction as any, but what we got was the opposite – a surge in home sales that resulted in price increases and bidding wars. It is not entirely clear what caused the surge in home buying interest because, despite rock bottom mortgage rates, there has still been huge uncertainty in the economy. So, without understanding why the surge in real estate interest occurred when all signs pointed to a recession, it will be difficult to predict exactly where we’re headed in the fall market.
Is the bubble about to burst or will the streak continue?
According to realtor.com, the national median home price rose 10.1% on a year-over-year basis since the week of August 15, 2020. The same article suggests that while some experts may be thinking we’re in a bubble that’s just about ready to burst, we may simply be looking at a curve that’s going to level out instead, which does seem to be the more logical prediction.
Realtor.com also discusses how if we are in a bubble, that it looks nothing like the bubbles we’ve seen in the past. The Great Recession saw an excess supply and little to no demand. Now, in 2020, we are seeing record-low mortgage rates, bidding wars, and low inventory (which has been an issue for many areas of the country for some time now). People still want to buy and not enough want to sell. Until this dynamic changes, it’s doubtful we’ll see another recession similar to the one experienced in 2008.
The article mentions market corrections coming fairly quickly (within just a few months) under normal circumstances. However, we aren’t facing “normal conditions” and it’s become difficult for even seasoned experts to predict what will happen next.
Markets are overvalued right now, but demand has stayed strong and the record low mortgage rates are keeping buyers anxious to take advantage of them. The economy is uncertain, and many people have lost their jobs, have been furloughed, or are unsure of their job stability. However, many others have made a smooth transition to working from home and are, luckily, stable in their careers for the foreseeable future. Moratoriums have helped to ease the burden on homeowners and the initial fear we experienced at the start of the pandemic has faded as everyone has become accustomed to the new normal of face masks, gloves, and hand sanitizer everywhere we go.
So, will prices continue to rise, or will they start to flatten out?
As of now, prices continue to rise and unless we see an influx of inventory, a further increase in unemployment, an increase in mortgage rates, or some other situation arises that makes buyers want to pause their search, it’s unlikely we’ll see the leveling out any time soon. Typically, the Fall and Winter markets cool off but with the low inventory and so many looking to take advantage of low mortgages rates, it’s likely the Fall and Winter will continue to see a strong sellers’ market.
This does beg the question: When will we return to a more “normal” housing market. Well, that’s not clear right now, it seems that this too is our new normal, at least for now.
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