Zillow Sees Home Prices Rebounding By
May 6, 2020
demand and healthy housing-market dynamics will prevent U.S. home prices
from dropping more than 2-3% -- or more than 1.7% year over year -- in
the wake of the coronavirus, according to a forecast released today by
Zillow®. The forecast says home sales will fall as much as 60% this
spring and take through the end of next year to recover, while prices
will fall through the year but recover a few months sooner.
The steep drop in sales is spurred by overall economic uncertainty and
the industry adjusting to public health orders that shut down or
hindered the ways transactions have traditionally been done.
Those underlying dynamics still exist to fuel the recovery -- already
new listings and pending sales have ticked up, as well as increasing
adoption of tech tools to enable social distancing -- and others provide
resilience against the potential for widespread distressed sales. So the
effect on prices will be modest compared to the nearly 25% drop and
five-year recovery that defined the housing-led Great Recession.
Under that scenario, which Zillow
believes is 70% probable, the market is expected to include:
A rapid 50-60% decline in home sales, bottoming out this spring and recovering at a pace of about 10% each month through 2021.
forecast also includes a more pessimistic scenario (25% likelihood),
which shows a 3-4% price drop with continued weakness through all of
2021. A more optimistic scenario (5% likelihood) features a 1-2% dip in
home prices through the middle of this year, followed by a robust
recovery. These projections vary based on the expected duration of the
pandemic and the depth of its impact on the broader economy.