Even as the overall economy has continued to be mired in a recession, the housing market has shown signs of resurgence. Home sales fell rapidly during the onset of the COVID-19 (coronavirus) pandemic, as many individuals sought to avoid big ticket purchases during a period of significant economic uncertainty. As a result, the Real Estate Sales and Brokerage industry in the United States is expected to decline in 2020.
Housing sector outpacing the economy
However, as the coronavirus pandemic continues, an increasing amount of city residents and renters have sought out homes in the suburbs for more room to work from home and help their children with remote learning. In contrast to the 2007-09 recession, which was led by a decline in the housing market, this may result in the housing sector outpacing the economy as a whole.
Low interest rates on mortgages
The Federal Reserve has brought interest rates down to all-time lows to combat the pandemic-induced recession, which is reflected in the 30-year conventional mortgage rate declining 22.0% in 2020 alone. Low interest rates on mortgages are another factor pushing prospective buyers into the housing market.
High selling prices
However, while mortgage rates are decreasing, overall selling prices have remained high. Even as demand for homes may be increasing, supply in the housing market has continued to shrink, which has kept housing prices relatively high even amid the ongoing recession. Existing home sales are expected to decline 3.4% in 2020 alone, as the coronavirus pandemic and associated economic uncertainty, along with the fear of infection from showing their homes to prospective buyers, pushes homeowners to keep their homes off the market.
Industry opportunities
However, increased demand for housing and continued high prices may provide an opportunity for the Housing Developers industry in the United States. Although housing starts are expected to decline in 2020, primarily due to sharp decreases earlier in 2020 during the initial onset of the pandemic, the Commerce Department reported that single-family home building increased 8.5% in September 2020, while multifamily homebuilding fell 16.3% as demand for apartment housing has declined. Single-family homes comprise the majority of the housing market, which further points to a budding resurgence in the housing market and opportunities for the Housing Developers and Home Builders industries in the United States.
Conclusion
Overall, there are signs that the housing market is in the middle of a rebound even amid an ongoing recession. However, despite low mortgage rates, prospective buyers will likely be forced to be content with stubbornly high prices due to a continued decline in housing supply, even as demand ticks upward.
