Will Home Values Appreciate or Depreciate in 2020?
With the
housing market staggered to some degree by the health crisis the country is currently facing, some potential purchasers are questioning whether home values will be impacted. The price of any item is determined by supply as well as the market’s demand
for that item.
Each month the National Association of Realtors (NAR) surveys “over 50,000 real estate practitioners about their expectations for home sales, prices and market conditions”for the REALTORS Confidence Index.
Their latest edition sheds some light on the relationship between seller traffic (supply) and buyer traffic (demand) during this pandemic.
Buyer Demand
The map below was created after asking the question: “How would you rate buyer traffic in your area?”
The darker the blue, the stronger the demand for homes is in that area. The survey shows that in 34 of the 50 U.S. states, buyer demand is now ‘strong’ and 16 of the 50 states
have a ‘stable’ demand.
Seller Supply
The index also asks: “How would you rate seller traffic in your area?”
As the map above indicates, 46 states and Washington, D.C. reported ‘weak’ seller traffic, 3 states reported ‘stable’ seller traffic, and 1 state reported ‘strong’ seller traffic.
This means there are far fewer homes on the market than what is needed to satisfy the needs of buyers looking for homes right now.
With demand still stronger than supply, home values should not depreciate.
What are the experts saying?
Here are the thoughts of three industry experts on the subject:Ivy Zelman:
“We note that inventory as a percent of households sits at the lowest level ever, something we believe will limit the overall degree of home price pressure through the year.”Mark Fleming, Chief Economist, First American:
“Housing supply remains at historically low levels, so house price growth is likely to slow, but it’s not likely to go negative.”Freddie Mac:
“Two forces prevent a collapse in house prices. First, as we indicated in our earlier research report, U.S. housing markets face a large supply deficit. Second, population growth and pent up household formations provide a tailwind to housing demand.”
