Realtor.com: Housing in for roller coaster rebound post-coronavirus

Realtor.com has revised its 2020 Housing Market Forecast to take the impacts of COVID-19 into account, and the real estate website now foresees a rebound that may not be as upwardly linear as many hope.

The new report, written by Realtor.com chief economist Danielle Hale, anticipates home sales to bounce back as concerns about the virus dips. However, Hale cautioned that a later drop in sales may be in the cards, partly stemming from a future rise of infections as the coronavirus curve enters a potential second wave. That, coupled with lingering unemployment, will lead to what Hale calls “a see-saw recovery with ups and downs.”

“Early in the crisis, sellers showed a willingness and ability to respond to the evolving situation by deciding not to list in the spring, a typically busy time for housing,” Hale said.

“Many sellers are expected to come back to the market in late-summer when COVID infections are expected to abate enough to permit a resumption in many types of activities, giving buyers options and boosting sales in these months.”

Throughout the year, however, Hale said that buyers will likely see fewer homes listed and experience “periods of low-churn” with limited inventory entering the market like we’ve seen so far in the spring, especially during local coronavirus flare-ups. Secondary waves of COVID-19 infections will keep demand on a roller coaster, she added, with sales expected to slow again during these periods as sellers pull properties and demand recedes.

Marrying those projections with first- and second-quarter observations, Realtor.com forecast existing home sales to fall 15% for the year as a whole. The second quarter, normally the active spring buying season, is expected to suffer the most, pulling back 25% from the same period last year.

Housing starts are expected to decrease as well, down 11% per Realtor.com’s forecast. Due to this decline and to sellers de-listing properties, inventory will remain scarce. That’s normally a recipe for surging prices, but with buyer demand likely volatile as well, Hale anticipates that prices will remain “relatively stable.” She also expects the rate of inventory decline to steady, with the supply of for-sale homes shifting toward more availability of lower-priced properties.

Because of these factors, Realtor.com predicted just a 1.1% increase in home prices for the calendar year, with Hale noting that the market may even see “small declines” by the end of 2020.

Mortgage rates are expected to average 3.2% throughout the year, ending the year around 2.9%. While rates will remain advantageous for buyers, qualifying standards will also stay tougher than the recent norm, given lenders’ risk aversion during a time of high economic uncertainty.

“This will mean buyers need more cash for a downpayment and higher credit scores in order to get a loan with many lenders,” Hale said.

“Shopping around for the best rates and terms will be particularly important.”

Sellers will have their own challenges to navigate as they, too, look to buy their next homes while listing their current ones. With sales slowing and properties spending more time on the market, Realtor.com said that timing a home sale and subsequent purchase will be more difficult. While it may be easier on a seller to accept an offer with a home sale contingency, it may be harder to complete such a transaction in the current environment, Hale said.

Source: Scotsman’s Guide 5-13-2020 Author: Arnie Aurellano

Will COVID-19 Cause a Move to the Suburbs?

Analysis by Zillow suggests where homeowners choose to live could be changed due to COVID-19.

With more than half of working Americans (56%) being given the opportunity to work from home, 75% said they would like to continue doing so once the pandemic has passed, or continue to do so for at least half of the time.

Also, 66% of those working from home would be likely to consider moving if they had the flexibility to work from home as often as they want. Just 24% of working Americans say they thought about moving as a result of spending more time at home due to social distancing recommendations.

"Moving away from the central core has traditionally offered affordability at the cost of your time and gas money. Relaxing those costs by working remotely could mean more households choose those larger homes farther out, easing price pressure on urban and inner suburban areas," said Zillow Senior Principal Economist, Skylar Olsen.

"However, that means they'd also be moving farther from a wider variety of restaurants, shops, yoga studios, and art galleries. Given the value many places on access to such amenities, we're not talking about the rise of the rural homesteader on a large scale. Future growth under broader remote work would still favor suburban communities or secondary cities that offer those amenities along with more spacious homes and larger lots."

The Pew Research Center found prior to COVID-19, just 7% of civilian workers in the U.S. had the option to work from, although 40% worked in jobs that could be performed remotely.

Zillow also found more consumers are looking at their housing options. In mid-April, page views of for-sale listings on Zillow were 18% higher than in 2019.

Information by Zillow says among employees who would be likely to consider moving if, given the ability to work from home, nearly one-third said they would consider moving in order to live in a home with dedicated office space (31%), to live in a larger home (30%), and to live in a home with more rooms (29%).

Source: MREport 5-14-2020 Author: Mike Albanese

What does May rental and mortgage payments tell us about the housing market?

Most renters in the US managed to make full or partial payments in the first week of May, according to the National Multifamily Housing Council (NMHC), but there isn’t a reason to breathe a sigh of relief yet.

A survey by Apartment List, an online listing marketplace found that renters and homeowners that were able to make a full payment on their rent or mortgage in the first week of May was around 69%, which is down from 76% in April. In fact, 22% of rent and 22% of mortgage bills went entirely unpaid, compared to just 12% in April.

“We found that even out of those who paid their rent or mortgage on time in April, 16% of those people made no payment in May so far,” said Chris Salviati, housing economist with Apartment List.

“April may not have been as bad as we initially expected but there's definitely signals that things are worsening in May.”

Government assistance also played a less crucial role in helping Americans make their rent and mortgage payments, according to the survey. Among renters who received their stimulus checks, 71% paid their May rent in full, compared to 64% of those who did not receive one. For homeowners, Apartment List found delinquency rates were nearly identical when comparing those who received aid and those who didn’t.

What the survey also found was that the rate of non- or late payments between homeowners and renters were very similar. While it’s all speculative, Salviati says this could be a sign that homeowners are taking advantage of some of the relief options being allowed to them to perhaps help buffer their savings.

Almost 8% of mortgage loans are in forbearance and 10% of renters reported that their landlord or property manager proactively lowered their May rent. Forty percent of renters who have not paid their May rent report that they have agreed to terms for reduced or deferred rent with their landlord, the report stated.

These concessions from lenders and landlords are going to be really important moving forward, according to Salviati, especially after eviction protections and moratoriums are eventually lifted.

With no real form of rent forgiveness proposed, renter could end up 2 to 3 months behind in rent when the moratoriums get lifted and evictions are possible again,” he said. “These protections are preventing the very worst-case scenarios of evictions in the midst of a public health crisis, but as things start returning to normal, we could end up seeing a wave of evictions that are building up in a backlog.”

Salviati recommends landlords and lenders start looking at ways to continue supporting renters and borrowers, through measured prepayment plans or other strategies.

Impact on the U.S. housing market

As for the housing market, Salviati was skeptical to make any predictions but he expects the impact to play out over several years.

“What does jump out to me is that a lot of people facing extreme financial hardship right now and they are likely to feel financially strained for a while. Once people start moving again, it’s possible we will see an increase in folks looking for more affordable housing,” he said.

In major markets across the country, Salviati said a lot of the new rental inventory is targeted toward the higher end of the market and filling those vacancies may become increasingly difficult as we emerge out of this crisis. The other trend that may come out of the COVID-19 pandemic could be a sprawl from the major downtown cores.

“Companies coming back might start to question whether or not they need expensive downtown office space and workers may question if they need to be living in that expensive condo just to be close to the office,” he said.

Will prices go down?

With the real estate slowdown, Salviati also been fielding a lot of questions surrounding rent growth and pricing in different markets across the country. While this freeze hasn’t quite translated to lower rent prices yet, he says things are flattening out, during a time of year when things seasonally ramp up.

“Landlords seem to want to wait till things settle to get a clearer picture of what the landscape looks like before making any strong pricing decisions.”

That being said, Salviati notes a couple markets where rent dipped slightly month over month, despite that dip being modest. Rents fell by 1% month over month in Henderson, Nevada, a city on the outskirts of Las Vegas, which is a pretty sharp decline to see in a single month, he said. Orlando saw a decline of 0.7% month over month, and Miami saw a decline of 0.5%.

“These are places we’ve identified as having local economies that have been hit hard because they are highly dependent on tourism and have a high share of workers in occupations that can’t be done remotely.”

May’s missed payment rate was 32% for those who can work from home part time, and 34% who cannot work at all. That’s compared to 17% from full time remote workers, according to the report. Those whose jobs must be done at least partially in person also saw larger decreases in ability to pay compared to April.

Source: Mortgage Professional America 5-13-2020 Author: Kasi Johnston