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Economists from Zillow, the real estate search website, said home sales could plummet by 60 percent in the spring, as stay-at-home orders imposed throughout the nation to mitigate the spread of COVID-19 paralyzed the U.S. economy.
Home sales should increase by roughly 10 percent per month through 2021, the economists said.
But prices are expected to experience a much slower decline and a quicker recovery throughout 2021. Zillow forecast that prices will drop by about 3 percent by the end of 2020, although a more pessimistic scenario shows a 4 percent dip with continued weakness through all of 2021.
“Much uncertainty still exists, particularly with some states beginning to reopen and experts warning of a possible second wave of the coronavirus in the fall,” Svenja Gudell, Zillow's chief economist, said in a statement. “However, housing fundamentals are strong -- much more so than they were leading into the Great Recession -- and that bodes well for housing in general.”
Pre-crisis, the spring was expected to be the “hottest shopping season” in years, powered by record-low interest rates, higher-buyer demand and an increasing share of millennials entering prime first-time homebuyer age.
The good news is that those underlying dynamics still exist to help fuel the housing market’s recovery from the virus outbreak. The industry has also adapted to the era with new tech tools that enable social distancing. Already, new listings and pending sales have grown.
The overall effect on prices will be modest compared to the 2008 financial crisis, when sales plunged by 25 percent and took five years to recover.